Thai Oil Giants Hunt For Investments And Are Armed With $11 Billion

Nearly $11 billion combined in cash and marketable securities, such as bonds and other short-term investments are lying with Thailand’s PTT Exploration & Production Pcl and its parent company. And according to Chief Executive Officer Somporn Vongvuthipornchai, in order to rescue declining oil and gas reserves, the explorer is ready to spend from its portion on projects and exploration acreage.

Somporn said in an interview in Bangkok that projects that are already sanctioned and ready for development or early-life producing assets are being eyed by PTT E&P. In order to invest in liquefied natural gas plants, which would help feed the country’s growing demand, it’s also looking to work with its parent, PTT Pcl.

“We’ll have to rely on mergers and acquisitions to maintain our growth,” said Somporn. “We’re looking at opportunities in the few hundred million to $1 billion range.”

In October 2015, when Somporn took the reins of the upstream company, there was no such hunger. He watched as over his first six months they cratered below $30 to hit the lowest in more than a decade as oil prices had already fallen from the $100 a barrel range into the $60s.

By cutting costs and investments he kept the company focused on weathering the downturn. Meanwhile, there was a fall, from the equivalent of 1.1 billion barrels of oil in 2009 to 695 million last year, in proved reserves. That will last just five years at its current production rate.

“They have a relatively short reserves life and it’s pretty clear they’re going to have to acquire to grow as a company,” said Neil Beveridge, an analyst with Sanford C. Bernstein in Hong Kong, who has a neutral rating on the company.“Domestic oil and gas production is going to decline over the coming years, so that puts more emphasis on companies like PTT E&P to go overseas and build supply.”

Because it was hard to agree on long-term values, oil’s crash made deals difficult to close last year. Somporn said there is enough of a consensus now for buyers and sellers to find common ground, while the market will remain volatile.

“It’s a good time to grow while we have this cash with us,” he said.

When PTT accounts in its $10.9 billion, the E&P company has $4 billion in cash and marketable securities. And among listed energy companies in Asia, more than that amount of money is possessed by only China’s big three oil firms, led by PetroChina Co.’s $18 billion pile.

“There is an opportunity for us to participate more on the LNG value chain,” Wuttikorn Stithit, PTT’s executive vice president for natural gas supply and trading, said in a separate interview. “It’s kind of a natural hedge, because when the price of LNG is high, from the projects we would have some value.”

A project where the export facilities and production fields are combined, as opposed to projects such as those on the U.S. Gulf Coast, would be preferred by him as Somporn said geography doesn’t play as much of a limiting role for LNG projects.

In Anadarko Petroleum Corp’s proposed Mozambique LNG project, PTT E&P owns an 8.5 percent. The companies are beginning to discuss financing for the project, firming up gas contracts with buyers and finalizing legal requirements with the government, Somporn said.

Somporn said that the company is now focusing on working with existing onshore liquefaction plants instead of developing a floating production platform for the project.

“Thailand would be hungry for LNG,” he said. “Our Gulf of Thailand gas fields are getting mature, while demand is rising and rising.”

(Adapted from Bloomberg)

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Categories: Economy & Finance, Strategy, Uncategorized

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