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PTT Exploration and Production
KGI Securities (Thailand) has maintained a "neutral" rating on PTT Exploration and Production's (PTTEP) stock.
One key factor pulling down PTTEP's third-quarter profit is the write-offs of unsuccessful exploration drilling costs at US$2 million-$3 million (Bt73 million-Bt110 million) per dry hole.The drilling success ratio has dropped since the second quarter to 50 per cent, from 77 per cent in 2004-2005. The company said the lower success rate was due to increased exploration activities in lesser-known geological areas. As PTTEP carries out exploration activities beyond the Gulf of Thailand, the success ratio is unlikely to return to the prior level. Whether it will improve from the current level will be a test of its ability to utilise information from failed drillings to fine-tune future exploration. While the success rate has suffered, it is for a good cause with additional volume growth. These exploration activities are for incremental volume beyond currently projected ones. For instance, Burma M9 explorations are not accounted for in forecasted sales volume. Also, the company cited that the current 50-per-cent success rate is still much higher than the industry norm of 10-20 per cent. PTTEP will maintain its strategy in carrying out exploration in areas where petroleum is known to be available, including Burma, Vietnam, the Middle East and Africa.
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