Target price : Bt 124
Recommendation : BUY
Closing Price (11 May 09) : Bt 117
PTTEP Australasia's Montara to drive growth next year
- PTTEP generated net profit of Bt5,746.26m in 1Q09, down 35.47% YoY and 15.36% QoQ.
- Next year, petroleum sales volume are forecast to grow 25% YoY boosted by new output from PTTEP Australasia's Montara project.
- We leave our 2009 net profit outlook unchanged at Bt29,509.73m, but we ratchet up our 2010 net profit forecast for PTTEP to Bt40,701m from a previous estimate of Bt35,548.11m to account for the upward revision of our Dubai crude oil price forecast to US$60/barrel from a previous estimate of US$55/barrel.
- We also raise our price target for PTTEP to Bt124/share from a previous price estimate of Bt111/share. We keep a BUY opinion on PTTEP.
1Q09 earnings review: Quarterly profit down 35.47% YoY and 15.36% QoQ
PTTEP reported a net profit of Bt5,746.26m in 1Q09, down 35.47% YoY and 15.36% QoQ. The profit slide was chiefly attributed to a drop of as much as 23.22% YoY in average petroleum product prices to US$37.04 per BOE from a year-ago level of US$48.24 per BOE as Dubai crude oil prices fell precipitously by 52.9% to US$41.49/barrel from a year-ago level of US$88.09 per barrel, while gas prices rose to US$5.83 per MMBTU against the 1Q08 level of US$4.95 per MMBTU. As 64% of its revenue came from gas and the remaining 36% from oil, its average petroleum product prices therefore slipped to US$37.04 per BOE from the year-ago quarter level of US$48.24 per BOE. Though petroleum sales volume jumped 19.06% YoY to 217,194 BOED in 1Q09, the decline in average petroleum product prices was the main culprit behind a margin drop. The increased write-offs of dry wells also drove exploration expenses up sharply from Bt959m to Bt1,944m. Gross margin accordingly slipped to 48.13% from the 1Q08 level of 59.14%. SG&A expenses edged higher from the PTTEP Australasia project, the offshore Vietnam's 9-2 project and the Arthit project. Operating profit for the quarter therefore dropped 25.79% YoY and 5.06% QoQ to Bt11,168.31m. Interest expenses amounted to Bt235.63m. PTTEP also booked a FX loss of Bt404.79m in 1Q09 against a year-ago gain of Bt780m. In sum, PTTEP made a net profit of Bt5,746.26m in 1Q09, down 35.47% YoY and 15.36% QoQ.
Upward revision of Dubai crude oil price forecast for 2010 to US$60/barrel from US$55/barrel
We leave our 2009 net profit outlook for PTTEP unchanged at Bt29,509.73m. Our 2009 forecast assumes a rise of 9.6% YoY in petroleum sales volume and Dubai crude oil price of US$55/barrel. We however ratchet up our 2010 net profit forecast for PTTEP to Bt40,701m, up 37.9% YoY. The upward earnings revision comes as we raise our Dubai crude oil price forecast for 2010 to US$60/barrel from a previous estimate of US$55/barrel as crude oil prices have headed back to an average of US$53.57/barrel in May to date on expectations that oil demand will pick up. The average crude oil prices in May to date mark a sharp rise from an average of US$44.29/barrel for the first five months of 2009. The possibility is also high that capital expenditures will be reduced as the prices of petroleum exploration and production equipment have fallen back. Our 2010 estimate assumes that average petroleum sales volume will grow by 24.74% to 299,680 BOED boosted by new output from PTTEP Australasia's Montara project scheduled to start commercial production in late 2009 with sales volume of 35,000 barrels. We also revise our 2010 net profit forecast for PTTEP upward to Bt40,701m from a previous estimate of Bt35,548.73m.
2009 price target raised to Bt124/share, BUY rating maintained
Following earnings upgrade to account for the upward revision of our Dubai crude oil price forecast for 2010, we raise our 2009 price target to Bt124/share from a previous price estimate of Bt111/share. We keep a BUY opinion on PTTEP.
By Phillip Securities (Thailand) Plc. on May 12, 2009
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