PTTEP reports drop in earnings
PTT Exploration and Production Public Company Limited (PTTEP) has adjusted its investment plans after its net income stood at US$275 million (Bt8.88 billion) in the first quarter amid the oil price crisis and the Covid-19 outbreak in order to sustain long-term growth.
Phongsthorn Thavisin, PTTEP’s president and CEO, said the firm recorded total revenue of $1.77 billion (about Bt55 billion) in the first quarter, marking a 4 percent drop from the last quarter of 2019.
This softening of revenue came from drop in sales at 363,411 barrels of oil equivalent per day (BOED), compared to 395,028 BOED in the previous quarter, owing to low gas nomination from projects in the Gulf of Thailand.
Additionally, the average selling price dropped to $44.81 per barrel of oil equivalent (BOE), against $48.28 per BOE reported in the last quarter of 2019.
On the other hand, PTTEP gained $222 million this quarter on financial instruments, mainly from oil price hedging contracts.
The unit cost was maintained at $31 per BOED. However, the company had to pay $225 million in income tax due to the depreciation of the Thai baht against the greenback.
Taking all the aforementioned factors into account, PTTEP announced a net profit of $$275 million in the first quarter, marking a drop of 28 percent from $384 million in the last quarter of 2019.
The company’s operating cash flow stands at $981 million with a 72 percent earnings before interest, taxes, depreciation and amortisation (EBITDA).
Phongsthorn explained that the drop in domestic energy demand from the Covid-19 outbreak as well as the oil price crisis contributed to the drop in earnings.
PTTEP has revised its estimated sales volume for 2020 to 362,000 BOED, recording a 7 percent slump from the previous target of 391,000 BOED and will also reduce its expenditure for the year by 15 to 20 percent.
Its major spending cuts will come from the deferral of some exploration activities and a cut in non-operation related expenses, while maintaining its capital expenditure to ensure a continuity of energy supply in the country.
PTTEP will continue with its investment in development projects overseas, such as in Mozambique and Malaysia, to ensure production in these projects begins in the next three to four years as planned.
“The exploration and production business is being challenged by the oil price crisis once again. During the last downturn four or five years ago, the company restructured its costs, so now its current costs are low and competitive compared to those of our peers. However, the challenges we are facing today are not just about the price of oil, but also a global downturn that is affecting the business sector more extensively.
“In order to foster growth and sustainability of the company, rather than only lowering unit costs, we need to focus on organisation and culture transformation to be agile and adaptive to disruption. This transformation will ultimately make the future cost structure of the company more resilient and able to surpass any challenging situations,” he said.
