PTT EXPLORATION AND PRODUCTION 29 Jan 15
- Target sales volume of 343,000 barrels of oil equivalent per day, an increase of 6% from 2013 to serve domestic demand
- Recorded net profit of USD677 million after impairment losses from asset value re-assessment
- Dividend payment for second-half operating results at THB1.5 per share and for full-year operation at THB4.5 per share
- Continue "SAVE…to be SAFE" project to maintain strong performance
- Healthy financial status with cash on hands of USD4 billion
Tevin Vongvanich, President and Chief Executive Officer, PTT Exploration and Production Public Company Limited (PTTEP), said that last year is a challenging year for the upstream business as the tumble oil price took a hit to E&P firms globally. PTTEP is not an exception. The industry crisis has trimmed the company's profit and affected the overall business plan. The results of operations in 2014 and business strategy to survive the global oil price downturn are as detail below,
Operating results of 2014
PTTEP last year achieved a 10% growth of sales volume of 321,886 barrels of oil equivalent per day (BOED) in comparison with 292,629 BOED in 2013. The increase was primarily attributed to full-year revenue recognitions from PTTEP Australasia Project, the commencement of Zawtika Project and the acquisition of Hess Thailand. The average selling crude price was at USD63.88 per barrel of oil equivalent (BOE), slightly declining by 3% from USD65.58 per BOE due to the consequence of dropping oil price in the final quarter of last year. Natural gas price, the company's main product, in the previous year partially indexed to oil price and be adjusted in accordance with the contract period, resulting in minimizing impact from crude price. The company last year also gained USD197 million from oil price hedging. As a result, PTTEP generated revenue of USD8.017 billion, an 8% rise from USD7.445 billion in the year 2013.
However, expenses last year increased considerably from 2013 for several reasons. The major expense was from the increase of exploration and depreciation from the full-year operation of PTTEP Australasia Project, the commencement of Zawtika Project and the increased participating interests from the acquisition of Hess Thailand. Exploration and production cost also surged due to increasing write-off costs. Additionally, the sudden drop in global crude oil prices has forced PTTEP to re-assess asset values of PTTEP Australasia Project and Mariana Oil Sands Project, resulting in one-time impairment losses of USD997 million from both projects. However, the expense is the non-recurring item which will not affect the company's cash flow. Totally,PTTEP's expenses climbed to USD6.248 billion, a 53% rise from USD4.088 billion in 2013.
As a consequence, PTTEP last year recorded profit from normal operation of USD1.538 billion. With non-recurring items included such as asset devaluation, the company finally booked net earnings of USD677 million, tumbling by 63% from USD1.847 billion posted in 2013. Despite a severe drop in net profit, PTTEP remains its policy to pay dividend for the second-half operating results at THB1.5 per share. Totally, the dividend payment for the full-year operation is at THB4.5 per share. The date for closing of the company's share registration is on February 13, 2015, while the last day for the right to receive the dividend (XD) will be February 10 and the payment date is April 9 this year.
"Although PTTEP is in tough time, well-managed financial policy and business plan have limited the impact from falling oil prices. Last year, we completed the ownership restructuring of the oil sands project in Canada. If we did not decide to swap assets in the KKD project, last year we might book more loss from asset value adjustment. From the financial side, we issued Hybrid bonds and Thai Baht debenture. The bond issuances enable PTTEP to have strong liquidity of USD4 billion. Moreover, we are not in a rush to invest in the projects that have been proved the potential resources, for example, Algeria Hassi Bir Rekaiz, Mariana Oil Sands and Cash/Maple in PTTEP Australasia. The company still has time to consider the oil price behavior before it makes a decision on the investments," said Mr. Vongvanich.
To cope with the low crude price, PTTEP has initiated the "SAVE…to be SAFE" project since late last year to cut both short-term and long-term expenditure.
"We're reducing unnecessary costs and may consider deferring some high-risk projects that are inappropriate to invest under this oil price circumstance. However, we insist that our cost reduction program will not have an impact on the petroleum supply for the domestic consumption," he added.
2015 PTTEP Business Outlook
PTTEP expects to increase sales volume to 343,000 BOED, or 6% up from last year to meet the increasing demand of the domestic consumption. The supporting factors are full-year contributions of Zawtika Project and assets acquired from Hess Thailand as well as the expectation of first crude oil from Algeria 433a & 416b Project in the second half of 2015. The overall investment expenditure of 2015 amounted to USD 4.832 billion will be allocated for exploration, development and production activities primarily in Thailand and Southeast Asia.
Crude oil price volatility will persist in the first half of 2015. In the second half, the price may be swung back driven by slow surge of global oil supply. The company continues the risk management by hedging its oil and condensate based on Brent benchmark crude. Moreover, the company has kept implementing the "SAVE … to be SAFE" project to reduce operating costs. Although PTTEP applies the cost-reduction program, the company does not compromise with any safety standards and environmental policies.
PTTEP will closely monitor oil price movement and be ready for the project readjustment. Amid the current situation, PTTEP sees opportunistic M&A in petroleum resources in Thailand and Southeast Asia.
"We can operate with confidence amid current oil price uncertainty. Our financial status remains healthy and we're flexible to adjust the investment plan. Our aim is to lessen the short-term impact from falling crude prices as much as possible and remain the stability of the long-term growth," he concluded.
Petroleum proved reserve of 2014
Total petroleum proved reserves as of December 31, 2014 were 777 million barrels of oil equivalent (MMBOE) which consist of approximately 24% crude oil and condensate and approximately 76% natural gas.
January 29, 2015. For more information, please contact Media Management Section
Tongchit Pongorapin Tel. +66 (0) 2537 4587 E-mail: tongchitp@pttep.com
Vanduan Vijintanasarn Tel. +66 (0) 2537 5418 E-mail: vanduanv@pttep.com
Nalin Viboonchart Tel. +66 (0) 2537 4834 E-mail: nalinv@pttep.com
Disclaimer
The information, statements, forecasts and projections contained herein reflect the Company's current views with respect to future events and financial performance. These views are based on assumptions subject to various risks. No assurance is given that these future events will occur, or that the Company's future assumptions are correct. Actual results may differ materially from those projected.
2014 PTTEP Operation Update
PTTEP currently invests in 43 projects in 11 countries as follows;
Thailand:
The most projects are in production phase, both in the Gulf of Thailand and onshore. They can be continuously produced to meet the consumption of the country.
Southeast Asia
Zawtika projectproduces an average of 310 million standard cubic feet per day (MMSCFD) and delivered to both Myanmar and Thailand. Currently, construction of additional wellhead platforms and 10 drilling appraisal wells are well underway to support long term production, expected to complete by 2015.
Australasia:
In 2014, Montara field in PTTEP Australasia Project produced an average production of 18,000 barrels per day (BPD) while Cash Maple filed completed Maple-East exploration well with no commercial prospect. The geological and geophysical studies are ongoing. Moreover, PTTEP is studying the engineering design and development options for the field.
America:
All projects are in exploration phase for example Mariana Oil Sands project in Canada. The project is in the process of winter delineation campaign (WDC) whereas Pre-FEED activities as well as studying development options for Thornbury Phase 1 have moved ahead. In Brazil, PTTEP signed an agreement to acquire a 25% stake in Barreirinhas AP 1 project since April 2014. The seismic surveys program is expected to begin in the second quarter this year. In September 2014, PTTEP also invested in Brazil BM-ES-23 project with 20% shares. The project has commenced drilling exploration and appraisal in two wells, with one of them has been proved its crude oil potential.
Africa & Middle East:
Project in development phase such as Algeria 433a & 416b project currently, the construction of production facility and pipelines is proceeding. PTTEP is expected the production rate at 20,000 BPD by the second half of this year. Mozambique Rovuma Offshore Area 1 project, is in exploration phase. The company completed 5 drilling exploration and appraisal wells with natural gas discovery. The Front-End Engineering Design (FEED) of the Liquefied Natural Gas (LNG) Project is continuously developing. It is expected to start producing and delivering first LNG in 2019.
Awards and Recognitions
With commitment to conduct business under good corporate governance and business ethics, PTTEP has been widely recognized with awards and certifications in social and environmental responsibility, corporate governance and investor relations, such as;
- Became a listed company of the Dow Jones Sustainability Index or DJSI in Sustainability World Index of the Oil and Gas Sector. This world recognition marks the company's success and pride that reflects its commitment to operate business sustainably
- Global CSR Award 2014, Gold Level, in the category "Best Community Program Award" from winning entry of the "Flare Gas Utilization for Local Agricultural Product Processing" project which has helped alleviates poverty and raise incomes in the Nong Toom Community, Sukhothai province
- Certificate of acknowledgement as Thailand's Private Sector Collective Action Coalition Against Corruption Council (CAC) Anti-Corruption Organization Thailand or ACT
- SET Award of Honor: Top Corporate Governance Report Awards for the 10th time and Investor Relations Awards for the second consecutive year from the Stock Exchange of Thailand and Money and Banking Magazine
- Asia's Best CEO (Investor Relations) Award, Asia's Best CFO (Investor Relations) Award, Best Environmental Responsibility, and Best Investor Relations Company Award from the Hong Kong based Corporate Governance Asia Magazine.
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