PTT posted a loss of 1.55 billion baht in the first quarter as travel restrictions and the pandemic cut into demand.

Capital expenditures being rethought

National oil and gas conglomerate PTT reported a loss of 1.55 billion baht in the first quarter of 2020, as travel restrictions for the pandemic sharply cut into oil demand.

The group posted net profit of 29.3 billion baht in the first quarter of 2019, and 17.4 billion in the fourth quarter last year.

PTT is considering cutting capital expenditures this year by 10-15% in response to the fall in revenue.

In January, the company’s board approved a 69.3-billion-baht investment budget for 2020.

PTT president Chansin Treenuchagron said losses came from the collapse of global oil prices from last year’s average of US$63.30 per barrel to below $23.40 per barrel at the end of the first quarter.

The situation mirrors 2014, when global oil prices dropped from an average of $90 per barrel to below $40 per barrel after large reserves of crude oil were discovered in the US.

First-quarter revenue dropped 12% to 484 billion baht year-on-year from 551 billion.

PTT’s earnings before interest, taxes, depreciation and amortisation in the first quarter dropped 60% year-on-year to 32.4 billion baht from 80.5 billion.

“This resulted mainly from lower performance of the petrochemical and oil refining businesses that made oil stocks drop from the sharp decline in crude oil prices,” Mr Chansin said.

The collapse of oil prices happened because of a price war between Saudi Arabia and Russia, as Opec and its allies failed to reach an agreement to cut production.

He said its oil and gas drilling arm, PTT Exploration and Production, had lower sales volume and sales prices.

The gas business group recorded a decrease in its performance, mainly from the fifth unit of its gas separation plant being shut down for maintenance for a month.

PTT’s power generation, technology and engineering business saw improved performance because of an increase in revenue from rising sales, attributed to a previous asset acquisition (Glow Energy) doubling total power capacity.

To maintain high liquidity, PTT has implemented cost controls and reduced operating expenses by some 3.6 billion baht in the first quarter.

In response to the industry-wide crisis, PTT established a war room called the “Vital Center” to plan and manage its response in the near and long term.