PTT will reduce its stake in two refining units, with a planned liquidation of its stakes in Bangchak Petroleum (BCP) and Star Petroleum Refining (SPRC).
Surong Bulakul, PTT’s chief financial officer, said that the company had a plan to reduce its stakes to facilitate more competition in the oil refining business. Presently, PTT has stakes in all refineries in Thailand, which includes the country's largest - Thai Oil.
PTT plans to liquidate its entire stake in BCP if the price and returns are reasonable. “PTT has had a policy to sell its stakes in BCP and SPRC for a long time. However, the offers were not reasonable. Now, BCP has restructured its business. If PTT does not hold a stake in BCP, there can be collaboration,” he said.
According to Trinity Securities research, PTT holds a lower stake than its associated companies. Presently, PTT holds 374.74 million shares, or a 27.22-per-cent stake in BCP.
PTT and BCP have a term contract for oil but that is not related to shareholding, with trade and exchange of products and raw materials at market prices. Proceeds from the sale of PPT’s stake in BCP are estimated at Bt6 billion or Bt2.10 per share, equivalent to 6 per cent of PTT’s estimated profit for the whole of 2014.
In the second quarter of this year, PTT is expected to see steady performance. Its first-quarter profit was Bt27 billion, down 24 per cent from the same period of last year.
The gas business is expected to drive PTT performance, given higher demand for gas as a result of higher power demand. Currently, gas sales volumes exceed 5 billion cubic feet per day, compared to 4.43 billion cubic feet per day in the first quarter of this year.
PTT's profit sharing from its subsidiaries is expected to decline from Thai Oil and BCP’s overhauls.
Maybank Kim Eng Securities (Thailand) said that PTT’s liquidation plan in refineries was to lower resistance in society that demands more competition in the refinery business. PTT’s stake in SPRC is expected to be lowered through an initial public offering expected in 2015.
The giant’s planned liquidation in BCP is to enable it to have flexibility in business operation, the brokerage house said, adding it was a difficult task, given the selling price and expected higher competition from outsiders.