PTT Exploration & Production

PTT Exploration & Production Plc (PTTEP) 

- 4Q14 faces net loss as expected    

 

PTTEP faced B24.4bn net loss in 4Q14, close to our projection, as a result of the following factors: 1) B33bn impairment charge from Montara and KKD Oil Sand projects was recognized; 2) Average petroleum selling price dropped by 13.2%qoq to US$56.5/barrel; and 3) Production cost rose by 6.0%qoq to US$46.9/barrel. Overall, FY2014 earnings were B21.5bn, decreasing 61.8%yoy, in line with our forecast. 

 

- Profit to weaken in 1Q15 but rebound for the remainder of 2015   

 

We maintain our FY2015 earnings forecast. Although 1Q15 profit may drop from 4Q14 because Dubai crude oil price is projected at US50-60/barrel, the profit is anticipated to revive for the remainder of the year since the crude oil price would rise, demand would rebound owing to worldwide economic recovery, and oversupply problem would subside from lower production of minor high-cost non-OPEC producers (e.g. shale oil producers in the US and Canada). Based on Dubai crude oil price assumption of US$75/barrel, PTTEP's normalized profit is projected to drop by 16.3%yoy in 2015, but its net profit is estimated to revive by 95.9%yoy since there would be no massive extraordinary expense like in 2014. 

 

- Share price already undergoes correction. Buy and wait for oil price surge   

 

FY2015 fair value (DCF) is B134. The share price has declined more than 30% in the past six months, partly absorbing the shrinkage in oil price and impairment charge in 4Q14. As the oil price is expected to rebound in 2H15, this is a good entry point. PTTEP's 2H14 dividend is announced at B1.5/share (B3/share in 1H14) or a half-year dividend yield of 1.3%; XD 

 

date is February 10.