Preview 4Q24F: Expecting a slip YoY
PTTEP’s share price has fallen 4% over the past month, in line with the SET but worse than the 7% rise in Dubai oil price. We believe this reflects investor pessimism on the stock market as a whole, which has no catalysts, since PTTEP’s earnings are expected to remain solid in 4Q24. We stay positive on its outlook although 2025 profit is likely to be eroded by lower global oil price; ASP should be supported by more stable gas product prices, accounting for >70% of total volume. We maintain our DCF-based TP of Bt164/share, based on long-term Brent price of US$65 from 2027 based on the current forward curve. We stay Outperform on the tempting discount to DCF valuation and healthy balance sheet (net D/E <0.3x).
4Q24F core profit to slip YoY despite higher sales volume. We expect 4Q24F net profit (release on Jan 30) to fall 1.9% YoY to Bt17.9bn, though inch up 0.4% QoQ on higher sales volume and lower unit cost. The impact of non-recurring items is expected to be minimal. Recurring profit is expected to fall 13.4% YoY (+2.6% QoQ) on lower average selling price (ASP) and higher unit cost. Sales volume grew 6.8% YoY and 6.7% QoQ to 507kBOED as several gas fields in Thailand resumed normal operation after planned shutdowns in 3Q24. Gas production at Block G1/61 (Erawan) remained lower than the daily contracted quantity (DCQ) on extended maintenance and lower gas nomination by PTT. This was partly offset by more production at Bongkot to fulfill the combined DCQ of 1,500mmcfd.
Lower oil price pulls down ASP. We expect ASP to fall 5.4% YoY and 2.7% QoQ to US$45.8/BOE due to lower oil price (-12.1% YoY, -6.2% QoQ for Dubai) but support was provided by a more stable gas price at US$5.9/mmcfd (+0.7% YoY, -0.5% QoQ). This reflects the lag before gas price is adjusted for producing fields in the Gulf of Thailand. The 3.1% QoQ fall in price of liquid products was less than the 6.2% QoQ fall in average Dubai oil price, reflecting the lag for adjusting oil price from operating fields in Oman and UAE. Hence, price of liquid products was at a marginal discount to average Dubai oil price for the quarter, compared with a normal US$2-3/BOE discount during an upward trend.
Unit cost to fall QoQ on volume effect. We expect unit cost in 4Q24 to decline 6.2% QoQ to below US$30/BOE due to volume effect but increase 3.4% YoY due to higher sales from high-cost production at Malaysian assets. This lines up with its guidance of US$28-29/BOE. We expect EBITDA margin to stay at >75% in 4Q24 vs. 74% in 9M24.
1Q25F and 2025F outlook. Despite raising its 2025 target sales volume by 3.3% YoY to 507kBOED, PTTEP’s 1Q25 sales volume is expected to fall QoQ on further maintenance shutdown of G1/61 field (Erawan). Hence, 1Q25F profit is likely to soften QoQ, assuming stable average oil price QoQ. We maintain our projected 11% weakening in 2025F net profit to Bt69bn from lower average oil price, although EBITDA margin should remain in line with the company’s target of 70-75%.
TP is Bt164, based on DCF (end-2025). We maintain our end-2025 TP of Bt164, based on L/T Dubai of US$63/bbl and Brent of US$65/bbl from 2027F. We maintain our volume assumption at 3% below guidance to provide a margin of safety.
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.
