Equity Analysis /
Thailand

PTT Exploration & Production PCL: Expansive core earnings expected for 1Q21

  • Greater sales volume and a higher ASP to boost 1Q21 core profit

  • Stronger demand and limited supply to boost oil prices in 2Q21

  • Further core earnings expansion expected for 2Q21

Suppata Srisuk
Suppata Srisuk

Equity Research Analyst

Bualuang Securities
16 April 2021

The tight prevailing oil market sets the scene for strong core earnings growth for 1Q21-through-2Q21, so we expect PTTEP’s stock price to rise (there is a 90% correlation between the share price and crude price shifts). The current valuation is undemand-ing—a YE21 PBV of 1.2x (0.9SD below its long-term mean of 2.1x).

Greater sales volume and a higher ASP to boost 1Q21 core profit  

We expect PTTEP to post a 1Q21 net profit of Bt5,564m, down 35% YoY but up 120% QoQ. Stripping out assumed extra items, core earnings would be Bt9,216m, up by 1% YoY and 54% QoQ. The core profit growth drivers were: 1) greater YoY petroleum sales volume, 2) a higher QoQ average petroleum sales price, and 3) a lower YoY and QoQ unit cost.

Petroleum sales volume is assumed at 376k boe/d for 1Q21, up 3% YoY (higher offtaking by PTT and a contribution by Block-H, Malaysia, which recently started up) but down 1% QoQ (lower crude loading). Our ASP assumption is US$41.8/boe, down 7% YoY (a lower gas sales price) but up 13% QoQ (a higher liquid sales price). We assume PTTEP’s unit cost at $29.1/boe, down by 6% YoY (lower OPEX, exploration, and depreciation expenses) and 6% QoQ (lower OPEX, exploration, and SG&A expenses).