Cash-rich Thai explorer eyes assets worth up to $1 billion

Supunnabul Suwannakij May 04, 2018

BANGKOK (Bloomberg) -- Thailand’s PTT Exploration & Production Pcl is ready to shell out as much as $1 billion on an overseas petroleum asset this year, and possibly more, as it tries to prop up growth amid falling reserves.

The upstream unit of state-controlled PTT Pcl is in talks to purchase a stake in oil, natural gas or liquefied natural gas assets in Southeast Asia and the Middle East, Chief Executive Officer Somporn Vongvuthipornchai said in an interview Thursday in Bangkok. One or more deals could be finalized this year, he said.

PTT E&P, which has amassed $5 billion in cash and marketable securities, is on the hunt for deals after crude’s slump shook up the industry. While the company weathered the downturn by cutting costs and investments, it hasn’t revived reserves, which have dropped every year since a peak of about 1.1 Bbbl in 2009. Its 631 MMbbl of proved reserves are enough to last five years at current production rates.

“We would finalize one or more deals this year with the size in a range of $300 million to $1 billion per deal,” Somporn said. The company plans to boost its reserves to sustain seven years of output through mergers and acquisitions, he added.

PTT E&P will favor projects in Southeast Asia, but is also looking in the Middle East where low production costs could help withstand price volatility, according to Somporn. Global benchmark Brent crude reached a nadir below $30 in 2016 and last month exceeded $75.

Final decisions

The company will accelerate final investment decisions on key developments, including an LNG venture in Mozambique, and is seeking to reach an FID with its partners on a Vietnam gas project as soon as this year. Closer to home, it has teamed up with Total E&P Thailand to renew its concession for the Bongkot gas field, and is negotiating with Chevron about boosting its stake in the Erawan project.

“We’ve been operating the Bongkot gas field for 20 years with a good track record and competitive costs,” Somporn said. “We’re in a good position for the bidding.”

PTT E&P shares climbed as much as 1.5% to 138.50 baht, the highest intraday level in more than a week, bucking a 0.1% decline in the benchmark SET index.

The company targets sales volume of about 300,000 boed this year, similar to the levels in 2017. It has set aside $15 billion for investments over the next five years, and is seeking opportunities in LNG plants, power generation, battery storage and decommissioning old wells.

“We’ve been working on M&A activities over the past two years but it’s quite difficult to reach a deal,” Somporn said. “Sellers do not want to sell, while we’re selective.”

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