PTTEP in the buying zone

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PTTEP in the buying zone
PICHAYA CHANGSORN
THE NATION



BANGKOK: -- PTT Exploration and Production (PTTEP) is now tilting its investment plan towards purchases of petroleum fields and mergers and acquisitions after oil prices sank to a six-year slump. "Our priority is buying producing assets in Thailand and in the region. If they don't sell their assets, we can buy the companies. There are opportunities," Tevin Vongvanich, chief executive officer of the country's largest petroleum explorer, said in a pre-recorded television programme that aired yesterday.

Shale assets in the United States are also interesting, as buying producing assets may be cheaper than exploring for new petroleum reserves, he said on Nation Channel's "Timeline" hosted by Suthichai Yoon.

PTTEP is reviewing five overseas projects in Myanmar, Mozambique, Canada, Australia and Algeria, which are still at the exploration stage.

At US$70 a barrel, 70 per cent of the investment projects in the company's $24 billion five-year investment plan were firm, but now at less than $55, more projects will be deferred.

Due to the discovery of shale in the US, oil prices may gradually recover or make a "U shaped" instead of a "V-shaped" recovery.

Or in some theories, oil prices could even take an "L-shaped" path, which means staying low for a long period.

"Around year-end, we thought it had already hit bottom. But today, nobody is sure how long [it] will last," he said.

However, PTTEP could endure the low oil prices, thanks to its average production cost of $42 a barrel. In comparison, the cost to extract shale from a greenfield deposit is believed to be more than $50.

"On an accounting basis, some projects may book a loss if oil prices fall to $30 a barrel, but on a cashflow basis, we can survive," he said.

PTTEP, which succeeded in raising $1 billion from issuing hybrid bonds last June, a month after the military coup was staged, now has a cash war chest of about $3 billion to finance acquisitions, pay debt and make investments.

The government was on the right track to open the 21st petroleum exploration bidding round because it had been delayed for many years.

"The reserves we've found over the last 15 years (during the last three auctions) are less than the petroleum we use in one year," he said.

Because most of the blocks available in this round are old ones returned by oil and gas companies after they did not find any or only negligible petroleum reserves, the potential of discovery is believed to be not high and it is appropriate to use the existing concession regime to govern the 21st bidding.

"But for a new area such as the overlapping area (between Cambodia and Thailand in the Gulf of Thailand), the production-sharing regime might be suitable," he said.

Some non-governmental groups have opposed the new petroleum bidding and asked for a change from the concession to a production-sharing regime that is used in some neighbouring countries.

However, there are countries including Indonesia that are considering shifting from production sharing to concessions, which involves less state interference and opens less chance for corruption, he added.

Source: http://www.nationmultimedia.com/business/PTTEP-in-the-buying-zone-30252641.html


-- The Nation 2015-01-26

[siampolee]

Well if the funds are available this is indeed the time to expand petroleum fields and also no doubt refining plants and exploration companies.

According to that which one reads many advances have been made in the area of mineral extraction from the more challenging deposit areas. Thus oil is like land and there isn't any new oil being made.

Indeed it seems as if this is the ideal time to buy.

Edited January 25, 2015 by siampolee

[NeverSure]

He wants to buy. I suppose he's already considered that the giants such as BP would buy if the price was right and the oil reserves were known. For anything substantial and proven, he'll be bidding against BP, Chevron and Exxon etc.

[Robroona]

"The reserves we found over the past 15 years are less than the petroleum we use in one year," he said.

That figure shows a company going out of business, unless it is a mis quote

[Time Traveller]

He wants to buy. I suppose he's already considered that the giants such as BP would buy if the price was right and the oil reserves were known. For anything substantial and proven, he'll be bidding against BP, Chevron and Exxon etc.

You are wrong. BP Chevron and Exxon are so large they are only interested in the largest fields or exploration in areas that complement their existing production. Any small purchases makes almost no effect on their total revenues that it's just not worth their time bidding.

[Time Traveller]

"The reserves we found over the past 15 years are less than the petroleum we use in one year," he said.

That figure shows a company going out of business, unless it is a mis quote

I think that quote is referring to Thailand. PTTEP has bought many oil fields in other countries, so don't worry, as long as people need oil, they'll still be in business for a long time.

[rotary]

We are not at the bottom of the oil price yet, it will get "sweeter" for buyers mid-year 2015 as weak players fall out.

[chotthee]

Thai-Malaysia Joint Development was supposed to be 50% Thailand and 50% Malaysia.

This is not so.

I believe the Thais are cheated by the Malaysian, because the operator for the Thai side "HESS Oil Thailand" only have a nameplate office in Bangkok, with ZERO people.

[Soutpeel]

Thai-Malaysia Joint Development was supposed to be 50% Thailand and 50% Malaysia.

This is not so.

I believe the Thais are cheated by the Malaysian, because the operator for the Thai side "HESS Oil Thailand" only have a nameplate office in Bangkok, with ZERO people.

Does it matter provided they get 50% of the royalties ?

What a great business model all those royalties for doing nothing and not employing any one and let their other party have the headaches will running the facilities

[rickirs]

"buying producing assets may be cheaper than exploring for new petroleum reserves,"

Not generally.

Producing ASSETS do not become cheaper with the price of oil. The wholesale price of oil includes the value of the oil that can and will fluctuate. The cost of assets are fixed, sunk costs aside from declining value for depreciation and set aside for capital re-investment. There are exceptions such as companies that have gone bankrupt or heading towards bankruptcy who are willing to sell company assets for less than "book" value to recoup a little of their original investment. Maybe bankrupt company assets are what PTTEP is looking for investment.

In fact producing ASSETS may appreciate in value over time if the cost for new assets has appreciably increased over time and/or there is a scarcity of availability of those assets in the market. In the 1970's portable oil rigs were so much in demand throughout the world, the purchase price of a new rig was easily triple the original cost - supply & demand.