Analysts Rate “BUY” on PTTEP after Strong Set of 1Q23 Results

Kiatnakin Phatra Securities (KKPS) reaffirmed its “BUY” rating on shares of PTT Exploration and Production Public Company Limited (SET: PTTEP), with a target price of THB182.00 after the leading oil refinery in Thailand reported excellent earnings for the first quarter of 2023.

In 1Q23, PTTEP had a net profit of US$569 million, increasing US$251 million or 79% from net profit of US$318 million in 1Q22, mainly due to higher revenue from sales, while massive loss from oil price hedging instruments was recognized in 1Q22. 

However, the operating net profit for the quarter has declined, as a result of a drop in sales volume to 460,817 BOED, mainly from lower sales volume from overseas projects, coupled with a decline in average selling price following decrease in global crude price. The average selling price was then reported at 50.01 USD/BOE, while the unit cost was also reduced to 26.07 USD/BOE.

KKPS pointed out on Friday that despite a production hiccup at the Sabah H project in Malaysia and lower gas sales volume from the Oman Block 61 Project, the Arthit Project, and the Algeria Hassi Bir Rekaiz Project, PTTEP was able to recognize a strong set of 1Q23 results. 

KKPS’ investment thesis is supported by PTTEP’s attractive valuation and strong balance sheet, as well as its potential reserve profile upgrade, potential acquisitions after foreign drillers’ exits, and its oil price leverage.

PTTEP expects the average sales volume for the second quarter and full year 2023 to be approximately 437,000 and 456,000 barrels of oil equivalent per day, respectively. Sales volume is expected to decline in 2023, compared to the previous year, as a result of lower sales volume from overseas projects.

Meanwhile, Daol Securities forecast sales volume of PTTEP to decrease to the tune of 455-508k BOED,compared to 468k BOED in 2022, and also adjust down blended ASP to an area of USD44.8/BOE-USD48.5/BOE from USD47.4/BOE-USD49.9/BOE earlier to reflect falling crude oil and gas prices. Therefore, the analysts lowered its target price to THB175.00 from THB200.00, but maintained a “BUY” recommendation.