Update forecast on new investment plan
We update our projection and TP after release of the latest 5-year investment plan which focuses on maximizing production from current producing assets, predominantly in Thailand. It lowered its 2025 target sales volume by 3% from earlier guidance. Coupled with a lower Brent price assumption of US$75/bbl (from US$77), we revise down our 2025 net profit forecast by 12%. We also cut our DCF-based TP by 5% to Bt164/share from Bt172, based on long-term Brent price of US$65 (from US$70) from 2027 based on the current forward curve. We maintain our Outperform, as last close is a >30% discount to DCF valuation and balance sheet continues strong (net D/E <0.3x). PTTEP will continue to drive earnings for PTT Group over the next 5 years.
Slight increase in 5-year investment budget. PTTEP’s new five-year investment budget is US$33.6bn, up 3% from the 5-year plan announced in Dec 2023. Of this, US$21.2bn is capital expenditure (63% of total) and US$12.4bn operating expenditure (37%), plus provisional budget of US$1.7bn for investment opportunities in other businesses beyond E&P, such as offshore wind, CCS, hydrogen and corporate venture capital. About 23% of the budget (US$7.8bn) will be spent in 2025 to maximize production from current producing assets (47% of total budget).
Trims target sales volume for 2024-25. PTTEP revised down its 2024 sales volume guidance to 491kBOED from 501kBOED, implying an increase in 4Q24 volume of 7.2% YoY and 7.1% QoQ to a record 509kBOED, in line with our assumption. It also trimmed 2025 sales volume by 3% from previous guidance to 507kBOED (+3% YoY) to factor in the aging of production facilities in the Gulf of Thailand that necessitate more frequent planned maintenance shutdowns. About 69% of sales volume is expected to be contributed by producing projects in Thailand. PTTEP has excluded the SK410B project in Malaysia (Lang Lebah) from the 5-year plan as the budget is higher than previously expected and it will undertake further assessment in 2025. Offsetting this is newly acquired projects in Africa and other greenfield projects in Malaysia.
Expanding asset base in Africa. PTTEP also announced a new asset acquisition in Algeria, the Touat project, taking effective interest of 22.1%. This is PTTEP’s first gas asset in Algeria and the third in the country after Bir Seba (35% interest) and Hassi Bir Rekaiz (49%). As an operating asset, it will contribute to PTTEP immediately after the transaction completes in 2Q25 with expected profit sharing of US$20-30mn p.a. for full-year operations.
2025F earnings outlook. We expect 2025F net profit to weaken 11% YoY to Bt69bn (down 12% from previous forecast) from the lower oil price, although EBITDA margin should remain in line with the company’s target of 70-75%. Upside to forecast is profit contribution from a new JV in Algeria (Touat) and higher oil price due to escalation of geopolitical tension in the Middle East.
TP cut to Bt164 based on DCF (end-2025). We cut TP (end-2025) from Bt172 to Bt164, based on L/T Dubai of US$63/bbl and Brent of US$65/bbl from 2027F to align with the forward curve for oil price, though this is below the five-year average of US$72. We maintain our volume assumption at 3% below guidance to provide a margin of safety. At our TP, it trades at 1.2x 2025F PBV or at 5-year average.
Risk factors: 1) Volatile crude oil price, 2) higher unit cost, 3) asset impairment and
4) regulatory change on GHG emissions. Key ESG risk factors are the environmental impact of its business and adapting to transition to clean energy.
