Thailand's sole petroleum explorer saw a 16% year-on-year drop in profit in the third quarter, driven by asset depreciation and write-offs, according to a company statement.
PTT Exploration and Production Plc (PTTEP) posted an unreviewed consolidated net profit of US$477 million or 15.28 billion baht in the July-September period, down 16% year-on-year.
Tevin: Sees continued oil price volatility
The decline was attributed mainly to $256 million in depreciation of the PTTEP Australasia and Contract 4 projects, as well as exploration expenses that ballooned to $77 million as a result of the write-off of the hydrocarbon searching cost for the PTTEP Australasia and Kenya L10 A projects.
The company's revenue grew by 14% year-on-year to $2.09 billion, largely buoyed by a rise in sales volume to an average of 325,248 barrels of oil equivalent per day, up from 286,578 boed in the same period last year.
The rise in petroleum sales volume was spurred by PTTEP's Australasia and Zawtika fields. Due to weakened global oil prices, PTTEP's average petroleum sales price fell to an average of $65.15 per boe compared with $65.71 a year ago.
For the third quarter, PTTEP recorded an increase in non-recurring net profit of $51 million gained from oil price hedging.
The quarter's net profit of $477 million can be divided by segments as follows: profit of the domestic exploration and production segment ($381 million), gain of the international exploration and production segment ($9 million), earnings of pipeline transport segment ($88 million) and loss in head office and other segments ($1 million).
For the first nine months of 2014, PTTEP reported a 10% year-on-year decline in net profit to $1.41 billion.
PTTEP president and chief executive Tevin Vongvanich anticipates oil price volatility persisting through the end of the year, with increased output from Libya and Iran's possible resumption of crude exports as a key factor influencing the supply side.
The subdued outlook for the European, Japanese and Chinese economies is also seen continuing to weigh on crude oil prices. But stronger energy demand during the northern hemisphere winter, as well as the possibility of oil-exporting countries slashing production next year, could halt the fall in prices.
PTTEP's production of natural gas accounts for 67% of sales volume. Moreover, 30-50% of the company's gas sales price is indexed to oil prices with a three-month, six-month or one-year lag time, depending on the project.
Therefore, the short-term outlook of lower oil prices has a relatively subdued impact on gas prices. Crude oil and condensates account for 33% of PTTEP's sales volume.
PTTEP has hedged about 70% of its crude oil and condensate volumes based on Brent benchmark crude to manage risks that could hurt financial performance.
In addition, PTTEP has begun a project to efficiently manage investment and operating costs, including cutting unnecessary expenses and changing the working culture to make all activities cost-conscious.
"For the whole of 2014, the company is keen on raising sales volume by 8% from last year's level, driven primarily by output from the Zawtika field and those from Hess Thailand that PTTEP acquired in the first half of this year," Mr Tevin said.
"Offshore Myanmar and Thai onshore are poised to become major contributors to PTTEP's 2015 growth."
PTTEP is involved in operations at 45 petroleum field projects in 11 countries around the world.
PTTEP shares closed yesterday on the Stock Exchange of Thailand at 146.50 baht, up three baht, in heavy trade worth 1.31 billion baht.