Thai PTTEP to invest $2.6 billion in SE Asia, looks at M&A
(Reuters) – Thailand’s top oil and gas explorer, PTT Exploration and Production Pcl (PTTEP) PTTE.BK, plans to invest $2.6 billion in Southeast Asia over the next five years, mainly in Myanmar, and is on track to triple its production to 900,000 barrels per day by 2020, its newly-appointed chief executive said.
Thailand’s second-most valuable company, which has been in a bidding war with Royal Dutch Shell (RDSa.L) for London-listed Cove Energy (COVE.L), expects mergers and acquisitions to contribute 150,000 barrels per day (bpd) towards that target, CEO Tevin Vongvanich told Reuters in an interview on Thursday.
“We will invest more than $2 billion in Myanmar, mainly in Zawtika and exploration in deep-sea fields, which needs a lot of money,” Tevin said, adding that Southeast Asia accounts for 22 percent of its five-year budget of $12 billion.
He said the company expected to seek more than $10 billion in funding to boost its production to 500,000 bpd by 2016, a key milestone in achieving its output goal.
PTTEP and Shell want to buy Cove Energy because it has an 8.5 percent stake in a block off the northern Mozambique coast where U.S. firm Anadarko Petroleum Corp (APC.N) plans to build large plants to ship liquefied natural gas (LNG) abroad.
Tevin declined to comment on whether PTTEP would revise its offer for Cove if Shell raises its bid after Anadarko – the license operator – announced on Monday another major gas find.
Last month Cove agreed to a $1.9 billion offer from PTTEP, a subsidiary of state-controlled PTT Pcl PTT.BK, but its shares continue to trade above the 240 pence per share offer price, signaling investors expect higher bids to come.
Cove Energy would play a major role in helping PTTEP achieve its production target and boost petroleum reserves to more than 10 years, said Tevin, a former chief financial officer at PTT.
“Cove is a good asset and worth the investment,” he said.
In Myanmar, the suspension of Western sanctions has opened up new opportunities, with many foreign investors showing interest on collaborating with PTTEP in the country, Tevin said.
The Zawtika field, at the offshore Block M9 in the Gulf Martaban, is on track to come onstream in 2013, with initial output of 300 million cubic feet per day (mmcfd), of which 240 mmcfd would be delivered to Thailand and the rest to Myanmar.
The output from Zawtika field will raise Thailand’s natural gas import from Myanmar to 1.2-1.3 billion cubic feet per day, including from nearby Yadana and Yetagun fields, said Tevin, who took over the top job at PTTEP on May 1.
PTTEP, which has five exploration and production projects in Myanmar, is considering boosting production at Zawtika to serve rising demand in the country, he added.
It is also seeking partners in exploration fields, including Blocks M3 and M11 in the Gulf Martaban.
PTTEP, valued at $18 billion and 65 percent-owned by its parent, is among Asia’s top 10 explorers, competing with big Chinese oil firms such as CNOOC (0883.HK) and Sinopec (0386.HK), and is looking to buy more oil and gas assets overseas.
“We are looking to buy assets everywhere where there is potential,” said 53-year-old Tevin, a keen golfer and jazz lover.
The company’s latest acquisition was a $2.3 billion purchase of a 40 percent stake in Statoil ASA’s (STL.OL) Canadian oil sands project in 2010. It raised $1.3 billion via bonds and loans to help partly finance the acquisition.
PTTEP shares have underperformed the market in recent months on concerns that the company may issue more shares to fund its bid for Cove Energy.
The company got a 950 million pound ($1.47 billion) one-year term bridging loan from UBS AG (UBSN.VX) to back its acquisition of the Mozambique-focused energy explorer.
Tevin said capital increase was an option for the company to consider and PTTEP, which has a debt to equity ratio at 0.4 times, had more room to seek debt. PTTEP has policy that the ratio can be as high as 1 times, but Tevin said he did not want it to be higher than 0.5.
“Bond issue is a good option. It is possible for the current market and for PTTEP. Long-term debt will help ease pressure to repay debt,” he said.
PTTEP recently issued $500 million of 30-year bonds and demand exceeded the offer amount by 5-6 times, reflected strong confidence in the company, Tevin said. The proceeds from the bond issue will be used for debt refinancing.
The stock has risen 2.7 percent in the past 12 months, versus a 14 percent rise of the main index .SETI.
PTTEP is involved in 41 oil and gas exploration and development projects. It plans to boost production at existing fields with the start-up of the Montara field in Australia in late 2012.
The proportion of unconventional energy, which refers to gas trapped between layers of coal and oil found in sticky pools of bitumen, is likely to increase in the next five years, Tevin said.