PTT Exploration & Production

PTT Exploration & Production Plc (PTTEP)

Develop existing projects + M&A to accomplish target of 600,000 bbl/day in 2020
There was nothing new from the analyst meeting yesterday. PTTEP’s
management still confirmed its goal to increase production and sale volume to
600,000 barrel/day by 2020, which is a double of the current capacity, by
depending on the projects in hand and new M&A when appropriate. However,
in the short term, development of current projects in hand is a key factor to
drive the profit growth as they are all potential projects, which are projected
to be developed to reserves in the future. Important projects under
development include KKD Oil Sand and Cove – Rovuma offshore area 1, which
would start producing oil from Leismer and Corner fields for KKD project by
2017 and LNG for Rovuma area 1 by 2018-2019. In addition, there are many
projects under exploration process that are believed to add value to PTTEP in
the next period, such as Algeria HBR, Cash/Maple, Myanmar M3&M11,
Mozambique, and Kenya. The company also insisted that it would be able to
succeed the target growth of 9%yoy and 10%yoy in 2013 and 2014. For
2013, earnings in 2H13 would be supported by sale volume from Montara
project with a production capacity of 30,000 barrel/day. Although the project
would not generate notable profit for PTTEP, it would still be able to generate
cash flow to enhance the company’s liquidity. For 2014, two projects would
start a commercial run, which are Zawtika (Myanmar) with gas production
capacity of 300,000 cubic feet/day and 433a&416b (Algeria) with crude oil
production capacity of 20,000 barrel/day. The current capital structure of
PTTEP is very strong; debt to equity ratio was low at only 0.32x after the
capital increase in late 2012, which is adequate for making additional loans
from financial institutions or issuing bonds for expanding investment in the
near future without an effect on the financial status.
- 3Q13 profit to grow qoq...Full year growth expected at 7%yoy
We estimate PTTEP’s profit in 3Q13 to grow from 2Q13. Sales volume is likely
to increase after Montara project has started its commercial run, and the
income would be recognized in 3Q13 from the first sale at 10,000 barrel/day,
probably rising to 30,000 barrel/day in late-2013. Moreover, production
capacity would increase as Bongkot South, Arthit, B8/32 and 9A projects
would resume their production. Also, Dubai oil price is likely to soar above
US$100/barrel, along with global economy, especially the US that has been
recovering continuously. Political conflicts in the Middle East would also
escalate oil price. Addition ordinary income is expected to be recognized from
compensation for Montara's insurance claim at B850m in 2H13. Overall,
FY2013 total profit is expected to grow 7.3% yoy and likely to make a yearly
new high due to increasing production volume.
- Buy. 1H13 dividend is B3. Div yield is 1.9%
We project fair value at end-2013 (DCF) at B188.70/share. We reiterate "BUY"
for its 18% upside and long-term fundamental factors that is likely to grow
due to new investment projects. PTTEP has announced dividend payment from
1H13 earnings at B3/share, or a dividend yield of 1.9% for the half-year. XD
date was on 6 August 2013.