Date of Report: October 29, 2024
Broker: UOB Kay Hian Private Limited
Company Overview
PTT Exploration & Production Public Company Limited (PTTEP) is a Thailand-based energy company involved in the exploration, production, and development of crude oil and natural gas fields. Listed under the Bloomberg ticker PTTEP TB, it operates mainly in the energy sector with a significant presence in domestic and international markets. As of this report, PTTEP has a market capitalization of approximately Bt583.6 billion (US$16.2 billion) and an average daily turnover of US$30.2 million over the past three months. The company is majority-owned by PTT (64.8%), with additional ownership by NVDR (6.2%) and the Social Security Office (2.0%).
Financial Highlights for 3Q24
- Revenue: Bt75.8 billion, down 3% year-over-year (yoy) and 10% quarter-over-quarter (qoq).
- Net Profit: Bt17.9 billion, representing a 25% qoq decrease and a 1% yoy decrease.
- Core Profit: Bt18.2 billion, a decline of 23% qoq and 4% yoy.
- Sales Volume: Decreased to 475 thousand barrels of oil equivalent per day (KBOED), largely due to the shutdown of the Gulf of Thailand field and lower sales from the Algeria Hassi Bir Rekaiz field.
- Average Selling Price (ASP): Remained stable at US$47.1 per barrel.
- Unit Cost: Increased to US$31.9 per barrel, impacted by higher maintenance expenses and costs from the Gulf of Thailand shutdown.
Financial Projections and Valuation
- 4Q24 Projections: PTTEP’s core profit is expected to further decline by 8-10% qoq, with anticipated net profit between Bt16.0-16.5 billion. Despite an expected sales increase due to resumed domestic production and Algeria operations, lower crude oil prices could impact profits. Additionally, a potential impairment of approximately US$150 million may be recorded from the Mozambique LNG project.
- 2025 Forecasts: The company’s forward price-to-earnings (PE) ratio for 2025 stands at 7.9x, considered attractive compared to the regional average. However, PTTEP faces ongoing challenges in investment support, prompting a “BUY” rating with a target price of Bt160.00.
Key Investment and Operational Highlights
- Write-off Expenses: In 3Q24, PTTEP incurred write-off expenses of Bt971 million for the Mexico Block 29 project, which was partially offset by Bt660 million in foreign exchange and hedging gains.
- Sensitivity to Oil Prices: PTTEP’s profitability remains highly sensitive to oil prices. For every US$1 per barrel decrease in oil prices, core profit is projected to decline by Bt935 million in 2025.
- Dividend Yield: PTTEP’s projected dividend yield for 2024 is 8.0%, increasing to 8.8% by 2025, supported by stable cash flow.
Environmental, Social, and Governance (ESG) Initiatives
Environmental Efforts:
- Carbon Capture and Storage: PTTEP is leading Thailand’s first carbon capture project, aiming for completion by 2026, which is pivotal for its goal of carbon neutrality by 2050 and net-zero emissions by 2065.
- Renewable Energy Investments: The company has invested in a 25.5% stake in the Seagreen Offshore Wind Farm in Scotland, aligning with its commitment to reduce carbon footprint and expand into cleaner energy sources.
Social Contributions:
- PTTEP engages in local community initiatives, focusing on education, healthcare, and infrastructure improvements. It also prioritizes employee safety and fair labor practices.
Governance:
- PTTEP has a stringent ESG risk management framework, with regular assessments to meet international standards, as reflected in its AAA SET ESG rating.
Recommendation and Strategic Outlook
Despite PTTEP’s favorable valuation, UOB Kay Hian advises investors to consider Bangchak Corporation (BCP) and Indorama Ventures (IVL) as alternative investment opportunities in the oil and gas sector due to their more robust investment-supporting factors.
