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).