Thailand: PTTEP warns of plunge in sales

Thailand: PTTEP warns of plunge in sales

An executive of PTT Exploration and Production Plc (PTTEP), the only
SET-listed upstream petroleum company, says its petroleum sales are facing a
sharp drop over the next few years.

Yongyos Krongphanich, senior vice-president for finance, said the company
expects sales to fall by 15.7% to 263 kilobarrels of oil equivalent per day
(KBPD) in 2021.

The assumption is based on a substantial drop in production from the Bongkot
gas block in the Gulf of Thailand, in addition to the company not commencing
production from new blocks.

That leaves mergers and acquisitions as the last resort for PTTEP to raise
production via stakes in other companies to increase sales, Mr Yongyos said.

The company estimates a continuous drop in its petroleum sales from 312 KBPD
this year to 311 KBPD in 2018 and 300 KBPD in 2019.

Production is scheduled to keep dropping ahead of the expiry of the Bongkot
concession in 2023 because PTTEP is unsure if it will be worth the
investment unless the concession is renewed. The company will start drilling
new wells in the block if it is certain that the concession will be renewed,
Mr Yongyos said.

The hefty drop in gas production will affect total sales in 2020-21, when
the company expects total petroleum sales to drop to 276 KBPD and 263 KBPD,
respectively, he said.

The Bongkot gas block produces about 900 million standard cubic feet per
day. The production comprises roughly 25% of the company's total sales.

A new round of bidding to renew the concession was delayed from the end of
last year to the third quarter this year.

"As the operator of this block for more than two decades, we would hope we
are considered a priority investor for renewal of the concession," Mr
Yongyos said.

The concession for the Erawan block, also in the Gulf of Thailand, will
expire in 2022 and is operated by Chevron Offshore Thailand.

Mr Yongyos said the company will look elsewhere if it does not win the
concession renewal. PTTEP's existing projects include the Ubon Contract 4 in
the Gulf of Thailand and the Algerian HBR project.

The Ubon project is expected to start production in 2021 with an estimated
petroleum output of 25-30 KBPD, while the Algeria project is scheduled to
start production in 2023 with expected production of 50 KBPD.

The company expects to make a final decision on the start date of its
Mozambique Rovuma Area 1 project by the end of this year, with production
slated to start in 2022-23.

"We are preparing to seek additional petroleum production three years ahead
of the expiry of the Bongkot concession to offset the dip in output if the
concession is not renewed," Mr Yongyos said.

PTTEP also plans to accelerate commercial operations of the Zawtika West
Area and the MOGE 3 in Myanmar, as well as Malaysia's SK B410B block.

Another option for the company to increase production quickly is to acquire
shares in other oil and gas exploration and production (E&P) companies, as
PTTEP has plentiful cash on hand, Mr Yongyos said.

The company is looking for opportunities to acquire assets in E&P companies
in Southeast Asia, he said.

Since the collapse of global oil prices in 2014, PTTEP has adopted cost
production and productivity measures that have cut production cost per unit
to US$30.46 per barrel of oil equivalent last year from $43.40 a barrel in
2014.

The measures have helped increase cash on hand to $4 billion.

Mr Yongyos said the company will ask for another $2 billion in loans if it
acquires stakes in other companies.

PTTEP shares closed yesterday on the Stock Exchange of Thailand at 93.25
baht, unchanged, in trade worth 517 million baht.

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Link to Original Article:
http://www.bangkokpost.com/business/news/1208109/pttep-warns-of-plunge-in-sa
les

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com