PTT Exploration & Production

PTT Exploration & Production Plc (PTTEP)

- Lowering cost amidst oil price plunge   

 

According to the analyst meeting yesterday, there is currently no new issue. PTTEP has been focusing on adapting to the changing oil price by controlling production cost and improving cost efficiency. Based on crude oil price assumption of US$50/barrel, the five-year investment plans may be revised; some plans that are not suitable and profitable in the current situation might be postponed. PTTEP is currently focusing on projects that are already generating income more than Greenfield project in order to minimize risk on exploration cost. 

 

- 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 producers. 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. As the oil price is expected to rebound in 2H15, this is a good entry point.