PTT Exploration & Production

PTT Exploration & Production (PTTEP)

Seek new projects to achieve target of 600,000 bbls/day in 2020
There was no new issue at the analyst meeting yesterday. PTTEP’s
management is still bullish about the long-term growth, with a target to
increase the production capacity from 300,000 bbls/day at present to
600,000 bbls/day by 2020. In order to achieve the goal, PTTEP divides its
investments into 3 parts as follows: 1) to maintain high production capacities
of currently running projects like Bongkot, Arthit, Yadana, Yetagun, MTJDA,
and S1; 2) to generate growth from projects under development like
Montara, Sotika, Algeria, KKD, and Cove; and 3) to seek new potential
petroleum sources to develop as a future add-on, such as Myanmar, Algeria,
Australia, Mozambique, and Kenya. However, for a short-term plan, PTTEP
would invest – through M&A - mainly in not-so-big projects that are currently
operating commercially or are going to start commercial runs in the near
future. The current capital structure of PTTEP is very strong; after the capital
increase in late 2012, the debt to equity ratio decreased to only 0.35x, which
sufficient for making additional borrowings from financial institutions or
issuing bonds to use for an investment expansion in the near future without
an effect on the company’s financial status. However, investors are still
worried about a commercial run of the Montara project, which might not be
able to start in late May 2013 according to the recent plan (after it had
already been delayed from February 2013 to April 2013), but the
management confirmed that the project will surely commence by 2Q13.
- 2Q13’s profit to weaken qoq, but growth is foreseen in FY2013
We estimate the profit in 2Q13 to weaken from 1Q13 due to the following
reasons. 1) An average petroleum selling price might decline following global
crude oil price (under an assumption for Dubai crude oil price at lower than
US$105/bbl in the rest of 2Q13. 2) The company might book an
extraordinary expense for impairment of Montara project in Australia average
by B900m a month since February 2013 until the day of its commercial
operation. However, this will be compensated by the production and sale
volume that is projected to increase by 1.38%qoq to 294,000 bbls/day from
the resumption of MTJDA project operation after a shutdown in 1Q13.
Considering the overall profit outlook in 2013, continued growth of 7.25% is
still foreseen, and the profit would be able to make a new yearly high from
increasingly growing production volume from new projects..
- Buy. 2013’s fair value is B188.70/share
2013’s fair value, using DCF, is B188.70/share. We reiterate our BUY
recommendation. Fundamental factors still have long-term supports from
continuous growth of new projects, while 2013’s PER is only 10.1x, which is
lower than the regional average of 12x.