PTTEP’s 2Q23 profit was impressive at Bt21bn (+2.1% YoY, +9.1% QoQ) despite lower oil and gas prices, slightly above market and INVX due to a US$14-15mn reversal of over-accrual for decommissioning of Block B8/32 (25% interest). Operating profit was in line, down 9% YoY but flat QoQ at Bt20bn on lower sales volume and ASP. 1H23 net profit was Bt40.3bn, up 29.6% YoY, also better than expected and led us to raise our 2023 profit forecast by 14.2%. Although the share is currently trading at only 9x PE (2023F) vs. 10-year average of 16.4x, investor appetite for the stock will be limited amidst rising global economic risks. We maintain our Neutral rating with DCF-based TP of Bt185, pegged to LT Brent oil price of US$70/bbl.
G2/61’s (Bongkot) PSC reduced overall sales volume. PTTEP’s sales volume fell 4.4% YoY and 3.5% QoQ to 444.8kBOED due to the full transition of the Bongkot field from concession to a production sharing contract (PSC) in Mar 2023. Though production volume was maintained at >800mmcfd, PTTEP booked only 62-65% of this as sales. This is offset by lower royalty fees and petroleum taxes. 2Q23 sales volume was also eroded by a fall in production volume of liquid products in Thailand (B8/32), the Middle East (Oman Block 61) and Malaysia (Sabah-K), partly due to technical problems and deferral of shipments to 3Q23. As these projects’ liquid oil products are priced at premium to Dubai, lower contribution to sales volume widened the discounted ASP of liquid product to Dubai oil price.
ASP weakened on lower oil price. ASP in 2Q23 fell 17.8% YoY and 8.6% QoQ to US$45.72/BOE on lower oil and gas price. This was lower than expected due to the adverse impact of a lower proportion of premium liquid products from several projects as above. Gas price was also lower than expected due to the full impact of Bongkot’s PSC. PTTEP was still able to maintain EBITDA margin at >75% in 2Q23 with cash cost down 18.4% YoY and 11.4% QoQ to US$12.62/BOE. Overall unit cost edged up 1.3% QoQ to US$26.41/BOE, but declined 8.3% YoY.
Guidance for 2H23 and forecast revision. Management guided that sales volume in 2H23 will go up HoH to 475kBOED vs. 453kBOED in 1H23 based on 2023 guidance of 464kBOED, up from 456kBOED previously. This will be offset by a lower gas price of US$5.8/mmbtu vs. US$6.2/mmbtu in 1H23. Higher oil price will be an upside risk for its liquid products and urges us to revise up our 2023 earnings forecast by 14.2% to Bt71bn (flat YoY) while we still expect a 23% YoY fall in core profit on lower oil price and sales volume. Our current forecast is based on 2023 Brent oil price assumption of US$82/bbl vs. YTD average of US$80/bbl. Our DCF-based TP (end-2023) of Bt185/share is based on L/T Dubai of US$68/bbl and Brent of US$70/bbl from 2025F.
Risk factors: 1) Volatile crude oil price, 2) higher unit cost, 3) asset impairment and 4) regulatory change on GHG emissions.
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