PTTEP sets sights on M&A feasibility under stable oil prices

PTT Exploration and Production Plc, (PTTEP), the only SET-listed upstream petroleum firm, says higher and more stable global oil prices will make it easier for the company to acquire or merge with other petroleum exploration and production companies.

Wirat Uanarumit, PTT director and board member, said PTTEP plans to raise its proven petroleum reserves by 125% from the average level of four years to 10 years.

PTTEP’s mergers and acquisitions plans are aimed at maintaining a production level of about 320,000 barrels of oil equivalent per day and rise to 600,000 boed by 2025.

“Oil prices have become quite stable and major exploration and production (E&P) companies are expected to re-adjust their asset portfolios and are mulling plans to sell some assets in Asia, especially those companies whose E&P activities stopped for a few years when oil prices fell below US$50 a barrel,” said Mr Wirat.

The collapse in oil prices to around $30 a barrel forced E&P companies to stop drilling for petroleum and pushed down the value of E&P assets, making them no longer worth investing in, nor worth selling. However, rebounding oil prices could push up E&P asset prices, and encourage E&P companies to sell them off.

PTTEP reports its proven petroleum reserves will decline sharply to 263,000 boed in 2021 from 312,000 boed if there are no new mergers and acquisitions (M&As) to help increase reserves or if the Bongkot gasfield in the Gulf of Thailand is not granted a new concession.

Mr Wirat, who is also the chief operating officer of upstream petroleum and gas business at national oil and gas conglomerate PTT Plc, said PTT and PTTEP are considering setting up a joint venture with a massive capital expenditure to develop a liquefaction plant adjacent to the Mozambique Rovuma Offshore Area 1 to produce liquefied natural gas (LNG).

Details and total value of the project are due to be finalised by early next year, he said.

The Rovuma Area 1 is estimated to have proven petroleum reserves of about 65 trillion cubic feet and shareholders of the development consortium are due to make a final investment decision by the end of the year on when production would start, he added.

Pannalin Mahawongtikul, PTTEP’s executive vice-president for finance and accounting, said as of the end of last year the company had cash on hand of about $4 billion, which is ready to be used for M&As over the next few years.

The cash is in addition to its five-year capital expenditure (2017-21) of $8.84 billion baht, she said.

In order to prevent depletion of the company’s proven petroleum reserves in less than a year, Ms Pannalin said PTTEP plans to accelerate the developments of Mozambique’s Rovuma, Algeria’s Hassi Bir Rekaiz and Ubon Field in the Gulf of Thailand.

The Ubon field will produce another 25,000-30,000 boed, while Rovuma could produce another 300,000 boed and Hassi Bir Rekaiz could produce another 50,000 boed, she said.

Jakapong Chawangsri, a stock analyst at Kasikorn Securities, estimated that at least one deal from the four deals that PTTEP is in talks with E&P firms could be sealed by the middle of this year.

He said the project most likely to manifest is the Yadana gas field in Myanmar and the SK 316 offshore gas field in Malaysia.

PTTEP recently failed to acquire Royal Dutch Shell’s 22.22% shares in KUFPEC Thailand Holding, which operates the Erawan gasfield in the Gulf of Thailand.

PTTEP shares closed yesterday on the Stock Exchange of Thailand at 93 baht, up 75 satang, in trade worth 895 million baht.