PTTEP reported net income of USD 275 million (equivalent to THB 8,612 million) for the first quarter of 2020, with its investment plan revisions amid the challenge of this oil price crisis and the outbreak of coronavirus 2019 (Covid-19) in order to sustain long-term growth.
Mr. Phongsthorn Thavisin, President and Chief Executive Officer of PTT Exploration and Production Public Company Limited (PTTEP) said that the company recorded total revenues of USD 1,771 million (equivalent to THB 55,335 million) in the first quarter of 2020, decreasing by 4% compared to USD 1,841 million (equivalent to THB 55,707 million) in the fourth quarter of 2019. The soften revenues were from lower sales volume at 363,411 barrels of oil equivalent per day (BOED), compared to 395,028 BOED in the previous quarter, as a result of low gas nomination from projects in the Gulf of Thailand. Additionally, the average selling price dropped to USD 44.81 per barrel of oil equivalent (BOE), against USD 48.28 per BOE reported in the last quarter of 2019, following to global crude oil price. On the other hand, PTTEP recognized a gain on financial instruments of USD 222 million in this quarter, which was mainly from the oil price hedging contracts. The unit cost was maintained at USD 31 per BOED. However, the company had income tax expenses in relation to foreign exchange rate fluctuation in an amount of USD 225 million, mainly due to depreciation of Thai Baht against US Dollar.
With the aforementioned factors, PTTEP announced net profit of USD 275 million (equivalent to THB 8,612 million) in the first quarter of this year, decreasing by 28% in comparison with USD 384 million (equivalent to THB 11,620 million) in the last quarter of 2019. Operating cash flow was at USD 981 million (equivalent to THB 38,093 million) with Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) margin at 72%.
Readiness to investment plan adjustment
Mr. Phongsthorn continued that the oil price crisis situation coupled with the impact from the outbreak of Covid-19 have suppressed the domestic energy demand. As a result, PTTEP has revised the estimated sales volume in 2020 to 362,000 BOED, 7% decreased from the previous target of 391,000 BOED and also reduce the 2020 expenditure by 15-20% from USD 4,613 million (equivalent to THB 143,012 million). The major spending cuts are from deferral of some exploration activities and reduction in non-operation related expenses while keeping maintenance Capital Expenditure (CAPEX) to ensure continuity of the energy supply of the country. The company will continue on the investment in development projects such as Mozambique Area 1 Project, and additional drilling activity in Malaysia, Lang Lebah gas field in Block Sarawak SK410B, to ensure the first production of these projects in the next 3-4 years as planned.
“The exploration and production business is being challenged by the oil price crisis once again. During the previous downturn in the past 4-5 years, the company had achieved in restructuring its costs structure, so that its current costs are low and competitive, compared with our peers. However, the challenges we are facing today are not just about the oil price, but also a global economic downturn that affects most business sectors extensively. In order to foster the growth and sustainability of the company, rather than only the lower unit costs, we need to focus on organization and culture transformation, to be agile and adaptive to disruptions. These transformation would ultimately set the future cost structures of the company to be more resilient and able to surpass any challenging situations.” Mr. Phongsthorn said.
The majority of PTTEP’s products, approximately 70%, are natural gas, which the price has already been secured in accordance with the sales agreement with price formula partly linked to fuel oil and referred to an average historical price of past 6 to 24 months. While crude oil sales, which accounts for roughly 30% of total sales volume, might be impacted by the oil price volatility, the company has entered into oil price hedging for some portions of oil sales in order to cope with such downside.