Oil firms to see flat earnings
Low gas price dents H2 profit outlook
Although the global oil price has started to recover, the earnings of oil-related companies are likely to remain flat in the second half of the year, weighed down by a weaker gross refinery margin and smaller profit from oil stocks, say analysts.
In contrast, power-generating companies are expected to see a better performance due to additional revenue from investment in previous years, they said.
An analyst at Asia Plus Securities said the global oil price is expected to rebound to the range of US$45-$50 a barrel in the second half, slightly above an average of $40 a barrel in the first half.
However, the rising oil price will not translate into a rise in revenue for oil companies as their earnings are expected to be encumbered by the other businesses at their subsidiaries.
“PTT’s earnings, for instance, are expected to be slightly better in the second half compared with the first. However, the better earnings are also expected to be pared by the sluggish outlook of subsidiaries such as PTT Exploration and Production Plc (PTTEP),” said the analyst who asked not to be named.
The analyst said PTTEP’s performance is expected to be weighed down by the poor global gas price.
“Global gas price normally lags three to six months behind that of oil. Despite the latter’s rebound, the price of gas will remain low until the third quarter and that will pare the gains of PTTEP, which also operates a gas business,” she said.
PTTEP posted a net profit of 8.29 billion baht in the first half, down 16% from the same period last year.
However, the petrochemical arm of PTT is expected to perform better in the second half of the year as the rising oil price means a rising spread margin of petrochemical products.
“The recovering oil price, however, also means rising production costs of petrochemical products,” the analyst said.
PTT vice-president Phichin Aphiwatanaporn said profit in 2016 would be higher than the previous year’s.
He said profit in the second quarter rose as much as 6% as the oil price recovered at a time when the company was continuing to slash production costs to secure a better profit margin.
“However, we cannot say if we can maintain this rate in the second half as we also need to take the performance of our subsidiaries into account,” said Mr Phichin.
PTT posted a 4.8% rise in net profit of 48.5 billion baht in the first half stemming from the recovery in oil price, rising refinery margin and petrochemical prices.
Regarding the oil refinery business, Ornmongkol Tantitanatorn, an analyst at Philips Securities, said the earnings of refineries are expected to remain low in the second half due to seasonal low refinery margin in the third quarter of the year.
“The refinery margin is expected to rise in the last quarter due to rising oil demand in the winter. But the rising margin may not be strong enough to help offset the low margin in the third quarter if the global economy does not fully recover,” she said.