National oil and gas conglomerate PTT Plc and its subsidiaries listed on the Stock Exchange of Thailand (SET) have an optimistic business outlook for the rest of the year, despite heavy losses early in the year because of the collapse of oil prices.
The average Dubai oil price dropped from an average of US$62 per barrel at the end of last year to an average $50 per barrel at the end of the first quarter because of lockdowns across the globe and restrictions on land and air travel.
However, the firm is still preparing for the worst by maintaining high cash on hand in case the pandemic is resurgent in Thailand or abroad.
PTT reported 1.55 billion baht in losses in the first quarter, compared with a net profit of 17.4 billion the same period last year.
Petrochemical arm PTT Global Chemical Plc (PTTGC) reported 8.72 billion baht in losses, compared with 6.6 billion in net profit year-on-year.
IRPC suffered even greater losses at 8.9 billion baht, down from a loss of 780 million in the first quarter of 2019.
Its oil refinery arm, Thai Oil Plc, lost 13.8 billion baht in the first quarter, compared with 4.4 billion in net profit over the same period last year.
Only two of its six subsidiaries managed to turn a profit in the first quarter. PTT Exploration and Production Plc (PTTEP) reported net profit of $275 million, down from $374 million in the first quarter of 2019. Power generation arm Global Power Synergy Plc (GPSC) tallied net profit of 1.58 billion baht in the first quarter, up from 942 million profit over the same period last year.
CAUTIOUS OPTIMISM
Over a recent video conference call, PTT told its shareholders they are confident oil prices have bottomed out after dropping below $20 per barrel on some indexes in April, and will likely rebound over the coming months.
Panporn Sasananan, vice-president for investor relations, said the Dubai benchmark price this year will likely range between $30-40 per barrel.
"We expect our business outlook will remain strong because the group has been revamping its production, technology, marketing and sales towards renewable energy over the last 10 years in line with global trends," said Mrs Panporn.
"Gas is the main revenue of PTT, so the group will continue with only basic fundamental needs of people, such as a gas infrastructure, because gas is the main fuel Thailand uses for power generation and will continue to grow in the long term."
She said as Thailand's economy recovers for the remainder of the year, PTT will maintain high liquidity by cutting capital and operating expenditure by 10-15% this year.
INNOVATE AND ADAPT
Kanyamas Rithidej, IRPC's vice- president of finance and investor relations, said in response to the drop in purchase orders for polymers for plastic moulding, the company could shift polymer grades from durable plastics to single-use plastics to serve growing demand for packaging used for home food and beverage deliveries that have surged during the lockdown.
PTT's oil refinery unit IRPC avoided oil stock oversupply from the domestic demand dip by exporting to countries that have already eased lockdown restrictions.
It also cut down its investment budget this year by 31% from 6.96 billion baht to 4.78 billion in order to maintain cash on hand.
PTTGC's acting vice-president for corporate finance Jittasak Soonthornpan said the company could offset huge surpluses of jet fuel production from demand falling 90% by converting the jet fuel to feedstock used to produce plastics and diesel.
Its polymers used for auto parts, building materials and durable plastics also suffered a significant drop in sales, but could be converted to plastic for medical equipment and packaged delivery containers, he said.
NARROWING FOCUS
Chanamas Sasnanand, senior vice-president of finance for PTTEP, said this year the company still wants to acquire an exploration and production firm as planned, but will narrow the scope of its efforts to oil and gas resources in Asean and the Middle East.
"We have high competitiveness, despite the collapse of oil prices, because our unit cost production is only $31 per barrel, one of the lowest in Asia," Mrs Chanamas said.
She said PTTEP will continue with its investment plans in Mozambique's Rovuma Area 1 for liquefied natural gas infrastructure that were scheduled to commence operation in 2024, as well as Malaysia's Lang Lebah offshore gas block that is expected to start operations next year and begin producing gas by 2026.