PTTEP cuts deepen as oil prices remain low

Senior executive says no layoffs are planned

SET-listed PTT Exploration and Production Plc (PTTEP) seeks to further cut production costs as global oil prices continue to fall.

Yongyos Krongphanich, senior vicepresident for finance, said the company aimed to reduce production cost per barrel by another 10% to US$34 this year.

The latest move is part of an ongoing cost-reduction strategy by PTTEP, a subsidiary of PTT, the national oil and gas conglomerate. Since the collapse of oil prices in 2014, PTTEP has trimmed production cost per unit by 10.6% to $43.45. Starting from January this year, the company further managed to cut the cost to as low as $38.50 a barrel.

Cash cost, another factor in the production cost per unit, will also be trimmed by 30% from its year-end level of $15.70 per barrel. The average cash cost was $21 last year.

The plan will be implemented along with cuts to PTTEP’s operational and capital expenditures, which are down by more than 10% to $3 billion baht from the previous level of $3.4 billion.

“We estimate the price average this year in the range of $30-$40, so we need to implement our cost-cutting plan for our business to survive,” Mr Yongyos said.

Additional cost-cutting measures will focus on facility rental fee cuts, streamlining procurement processes and managing higher worker efficiency.

Mr Yongyos insisted, however, that there would not be any layoffs.

The company also estimates that the surplus of oil in the global market will drop to around 700,000 barrels per day from 2 million BPD last year.

PTTEP expects sales volume of petroleum products this year to rise slightly to 323,000 barrels per day from 322,000 in the previous year thanks to the Zawtika project in Myanmar and the Bir Seba oilfield in Algeria, of which PTTEP is a stakeholder, being fully operational.

The company reported total 2015 revenue of $5.44 billion baht, down 27% from a year earlier. As a result, PTTEP posted a net loss of $854 million, down from a net profit of $677 million in 2014.

Amid falling oil prices last year, the company still achieved its goal of cost reductions, maintaining cash on hand of $3.3 billion and cutting operational expenditures by 30%, as well as keeping its debt per equity ratio at 0.27.

PTTEP shares closed yesterday on the SET at 74.25 baht, up 75 satang, in heavy trade worth 3.45 billion baht.

PTTEP’s Zawtika gas field off the coast of Myanmar. Despite the slight boost the project will provide to sales volume this year, the company is cutting costs across the board as part of an ongoing strategy to mitigate for low global oil prices.