Mostly state-owned energy firm Bangchak announces plans to sell Philippines-based subsidiary Nido Petroleum, citing costs.
Firm cites falling crude reserve, high production costs
Mostly state-owned energy firm Bangchak Corporation Plc plans to sell a subsidiary, Nido Petroleum Pty Ltd, which operates oil and gas drilling in the Philippines.
Nido owns productive petroleum fields such as Nido and Matinloc in the Philippines and holds licences to explore and develop production at six fields in West Linapacan in the Philippines and Gurita in Indonesia.
Bangchak acquired the firm in 2014 for US$113 million.
Chaiwat Kovavisarach, Bangchak’s chief executive and president, told shareholders via an online broadcast yesterday that the company would exit the asset. He said Nido’s crude oil reserve is declining and has high production costs.
LH Securities said Bangchak’s stock analysis showed that the drop in crude oil prices during the first quarter led Bangchak to decide to get rid of Nido at a loss of 1.4 billion baht.
Bangchak also has an oil and gas drilling arm in Norway through subsidiary Okea AS, which it acquired for 3.76 billion baht in 2018.
The company will hold on to its existing E&P arm in Norway, Mr Chaiwat said, because the cost of crude oil production in the area is less than $20 per barrel, compared with the $32-35 global market price.
Okea produces 25,000 barrels per day of crude oil.
As the company dumps assets, Bangchak plans to maintain cash on hand of as much as 20 billion baht.
Bangchak has also cut a combined 9 billion baht in costs and capital spending this year and acquired 8 billion baht from debenture issuance in March and 7 billion baht from a shortterm loan.
“We don’t know when the economy’s growth will resume, so we must maintain a lot of cash,” Mr Chaiwat said.
He referred to a report from the International Monetary Fund that forecast global economic growth to decrease this year, with GDP shrinking 6.7%.
Meanwhile, PTT Plc announced a cut in capital spending this year, down 22.2% from 69.310 billion baht to 53.9 billion baht, in preparation for a recession in coming months.
Although some countries are easing travel restrictions, oil and gas demand fell last month on fears of a second wave of the coronavirus pandemic.
PTT told the Stock Exchange of Thailand yesterday that the company and its subsidiary executives met to discuss the crisis and revise capital and operating expenditure and submitted an action plan to the company.
The plan is traditionally revised every six months, but the group will make an earlier revision in light of the rapidly changing situation.
While cutting some future projects, PTT will continue its development of a second liquefied natural gas receiving and regasification terminal in Map Ta Phut, as well as fifth-phase development of a gas pipeline and gas compressor unit.
According to a PTT statement released yesterday, the board approved the cut in capital spending.