PTT Exploration & Production Pcl (PTTEP) said its planned $1.8 billion acquisition of Cove Energy Plc (COV) will act as a platform to explore natural-gas deposits in East Africa that will help triple the Thai company’s output by 2020.
“Cove is an opportunity for us to gain an entry,” Chief Executive Officer Anon Sirisaengtaksin said in an interview at his office in Bangkok. “We are not just looking for this transaction. We are more strategically looking in East Africa.”
Beyond Mozambique, where Cove has a share in one of the largest gas discoveries in a decade, PTTEP is seeking larger reserves in Tanzania and Kenya, Anon said. East Africa offers a new source of gas supply for Asia, where China and India are the world’s fastest-growing major economies. Eni SpA of Italy, BG Group Plc of the U.K. and Statoil ASA of Norway also discovered natural gas off Mozambique and Tanzania.
“East Africa is a resource-rich region that could significantly help increase petroleum reserves for PTTEP,” Nalinrat Kittikumpolrat, an analyst at Asia Plus Securities Pcl in Bangkok, said by phone. “Still, it will take at least seven years before the project makes a contribution.”
Bangkok-based PTTEP, Thailand’s biggest publicly traded explorer, plans to boost production to 900,000 barrels of oil equivalent a day by 2020 through acquisitions and the expansion of projects in Australia, East Africa, North America and Southeast Asia, Anon said. Thailand imports about half of the 1.8 million barrels of oil equivalent it consumes each day, according to data from the Energy Policy and Planning Office.
East Africa is a “hot spot” with the potential for significant natural-gas discoveries, Anon said yesterday.
PTTEP shares have gained 5.9 percent this year, compared with a 7.2 percent advance in the 63-member Bloomberg World Oil & Gas Index. (BWOILP) The stock fell 0.6 percent to 178.5 baht as of 10:09 a.m. in Bangkok. Thailand’s benchmark SET Index, which is up 17 percent this year, was down 0.3 percent.
The company last month offered 1.1 billion pounds ($1.8 billion) for London-based Cove, beating a 992.4 million-pound bid by Royal Dutch Shell Plc (RDSA) for the African explorer. Cove holds 8.5 percent of a block off Mozambique where Anadarko Petroleum Corp. (APC:US) found as much as 30 trillion cubic feet of gas, enough to justify production of liquefied natural gas for Asian markets.
Mozambique’s government is assessing how much tax will be paid on the sale of Cove’s stake in the Rovuma basin, Mineral Resources Minister Esperanca Bias said on March 1. PTTEP is “now waiting for this clear resolution before we would be able to move on,” Anon said.
PTTEP may also buy assets including tight oil -- or oil from shale formations -- in North America or stakes in LNG projects that would supply the fuel to its parent company, PTT Pcl, Anon said, without naming any acquisition targets.
In November 2010, PTTEP bought 40 percent of Stavanger, Norway-based Statoil ASA’s oil sands project in Canada for $2.28 billion, the biggest acquisition by a Thai company. More purchases are likely, even if the company’s bid for Cove proves successful, Anon said.
“Each time we are going to make a decision we would have at least 40 deals in the deal-flow, and we will screen and only select one or two each year,” he said. “This will ensure you will not make a mistake and ensure you have quality of the new asset acquired.”
PTTEP may sell long-term hybrid bonds and is considering other capital-raising proposals to finance acquisitions, Anon said, without giving details. Debt won’t exceed 0.5 times the company’s equity, Anon said.
“We have the liquidity to support this new investment” in Cove, Anon said. “But to move on and make ourselves more flexible, a funding plan is important. So we are working to ensure we would be ready at any time to intercept these new opportunities.”
PTTEP has a debt-to-equity ratio of 0.4 times, compared with more than 1 for many of its global peers, Asia Plus’s Nalinrat said. The company has 111.2 billion baht of debt, including 79.2 billion baht of bonds and loans maturing in the next four years, according to data compiled by Bloomberg.
“With its discipline in avoiding increasing its debt, PTTEP may have to increase equity,” Nalinrat said.
The explorer has 41 oil and gas projects worldwide, and has said it plans to spend about $20 billion on expansion by 2016. The company’s net income rose 2.1 percent to 44.7 billion baht last year.
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