PTT Exploration & Production

PTT Exploration & Production Plc (PTTEP) 

 

- Massive net loss of B46bn in 3Q15  

PTTEP announced 3Q15 earnings with a net loss of B46.2bn, which was bigger than our estimate for a net loss of B22.6bn, versus a net profit of B1.31bn in 2Q15. Significant changes were impairment changes of as much as B49.8bn, compared with our estimate of B20bn, and Fx loss of B9.5bn as a result of THB depreciation; yet, there was compensation from B3.6bn in hedging gain. Excluding the abovementioned extraordinary expenses of almost B56bn in total, PTTEP was still able to book normalized profit of B9.5bn, which is better than expected. Overall, 9M15 earnings were a net loss of B36bn, compared with a net profit of B46bn in the same period last year, which is lower than our forecast. 

- Cut 2015 forecast to reflect disappointing earnings in 3Q15  

We revise down FY2015 earnings forecast from a net profit of B20bn to a net loss of B32bn to reflect worse-than-expected earnings in 3Q15 as a result of the aforementioned extraordinary expenses, especially impairment charges and Fx loss. An assumption of Dubai crude oil price in 2015 is kept unchanged at US$53/barrel. However, the earnings would revert to net profit in 4Q15 because there will not be massive extraordinary expenses like in 

3Q15. 

- Hold. Wait to buy after price correction  

We switch to use 2016 fair value, which is B90 (DCF), down from B94 in 2015. Although the share price has already declined and partly absorbed the negative factors, there is still awaiting impact from the worse-than-expected earnings. Accordingly, we reiterate to hold PTTEP and wait to buy again after the share price correction in order to reduce risk. 2H15 dividend yield can still be expected at B1/share, which is equivalent to that in 1H15.