PTT Exploration & roduction

PTT Exploration & Production Plc (PTTEP)

4Q12’s net profit declines 21.4%qoq mainly from Montara asset impairment
PTTEP reported 4Q12’s net profit at B13.8bn, decreasing 21.4%qoq but better than
our projection because we had overestimated the selling and administrative
expenses. However, the decline of the net profit has resulted mainly from an
extraordinary expense - B3bn of asset impairment for Montara project in Australia
after a commercial run of the project was postponed to end-1Q13 from 4Q12 and
resulted in an increase in the cost of the project. At the same time, overall cost also
rose significantly by 14.6%qoq to US$4.86/bbl because of a maintenance shutdown
of a big project Bongkot in 4Q12. However, these have been compensated by
revenue from sales of petroleum products that has increased by 2.7%qoq as a
result of the average petroleum selling price that is projected to increase by
3.7%qoq to US$66.38/bbl along with natural gas selling price which has risen
4.5%qoq to US$8.03/million BTU and the oil price that has increased by 2.5%qoq
to US$101.81/bbl, as well as the selling volume that has grown by 0.68%qoq to
294,000 bbls/day. Overall, 2012’s net profit stood at B57bn, growing 28.1%yoy.

Cut profit to reflect CAPEX and new sale volume. 7%yoy growth foreseen in 2013
We revise down our net profit forecast for 2013-2014 to reflect the new investment
budget of PTTEP over the next 5 years at US$24.7bn. Additional investment budget
results mainly from increasing investment activities for both existing projects, such
as South Bongkot and KKD Oil Sand extension, as well as new projects, such as
Zawtika M9 in Burma and the investment in Cove Energy. Meanwhile, we also raise
our assumption for investment expense from rising construction, drilling, and
developing cost. Moreover, the new forecast also reflects average daily petroleum
selling volume (from current projects) during 2013 - 2017. A decrease in the selling
volume in 2013 by 6% from the previous plan to only 310,000 bbls/day has
stemmed from a delay of a commercial run of Montara project to end-1Q13, but it
still grows 13%yoy from 2012. For the next 5 years, petroleum selling volume
would make a new high in 2014 at 340,000 bbls/day because during the year
PTTEP will recognize income from a new project in Montara (with a capacity of
25,000 bbls/day) for a full year as well as a new project Zawtika M9 that will start
its commercial run with a capacity of 30,000 bbls/day. Subsequently in 2H14, there
will be Algeria project with a production capacity of 20,000 bbls/day. The selling
volume will then stay flat for a while before rising again after 2017 when KDD Oil
Sand extension project and the Cove Energy start a commercial run. We believe the
aggressive growth will benefit net profit in 2013, generating continuous growth of
7%yoy and making a new high by year.

Buy. New 2013’s fair value is B188.7/share
Under the new forecast, new 2013’s fair value is B188.70/share (from B195.69).
We reiterate to buy as continuous growth is foreseen in the long run from many
new investment projects. At the same time, PER in 2013 stands at only 10.9x,
which is lower than the regional average of 12x. Moreover, PTTEP has announced
the dividend payment for 2H12 at B3/share or a dividend yield of 1.8%, going XD
on 12 February 2013.