PTT Exploration & Production Pcl (PTTEP) fell the most in two months in Bangkok trading after saying it plans to raise about 98 billion baht ($3.1 billion) in the nation’s biggest equity offering to fund expansion.
The shares fell 4.8 percent to 157.50 baht, the largest decline since May 23. The stock was the fifth-biggest loser in the 490-member SET Index (SET), which dropped 1.9 percent.
PTTEP, which plans to spend about $20 billion by 2016 to raise output, will sell 650 million new shares to its parent PTT Pcl (PTT) and other shareholders to support new projects, Chief Executive Officer Tevin Vongvanich said on July 20. The company needs to finance its 1.2 billion pound ($1.9 billion) bid for Cove Energy Pcl after beating Royal Dutch Shell Plc (RDSA) in the contest for control of the East Africa-focused explorer.
“$3 billion is higher than our forecast of $2 billion earmarked to buy Cove,” Paworamon Suvarnatemee and Wattana Punyawattanakul, analysts at Credit Suisse Group AG, wrote in a note today. “Extra proceeds would be reserved for new investments, which we believe generate lower return but higher risks than existing assets in its portfolio.”
The stock sale will help PTTEP meet a target to increase daily production of oil and natural gas to 900,000 barrels of oil equivalent by 2020, Tevin said in a statement on the company’s website. Daily sales volume was 253,411 barrels of oil equivalent in the first quarter, according to the company.
The number of shares offered and the amount PTTEP plans to raise implies a minimum price of 150 baht for each new share, according to Credit Suisse’s Paworamon and Wattana. The sale would be Thailand’s biggest ever equity offering, topping Siam Commercial Bank Pcl (SCB)’s 65 billion-baht share sale in 1999, according to data compiled by Bloomberg.
“Through this offering, we seek to optimize our capital structure and increase our financial flexibility for future expansion and investment,” Tevin said in the statement. “At the same time, we will expand our footprint in different regions worldwide to secure additional oil and natural gases to meeting the increasing energy demand in Thailand.”
The share price will be fixed through a “book building” process, Tevin said.
PTT, PTTEP’s parent, will buy as many as 403.4 million shares to keep its ownership of PTTEP at about 65 percent, PTTEP said in a regulatory filing. A further 214.4 million shares will be offered to the public and 32.2 million shares will be set aside to meet potential excess demand, it said.
Shares of PTT fell 4.1 percent to 326 baht, the biggest decline since Oct. 20.
PTTEP has oil and gas projects in countries including Canada, Australia, Myanmar, Indonesia, Vietnam and Oman.
Cove’s largest asset is an 8.5 percent holding in Mozambique’s Rovuma Area 1, where a group led by Anadarko Petroleum Corp. (APC:US) has found as much as 60 trillion cubic feet of recoverable natural gas, more than six times the U.K.’s existing reserves. Cove raised its estimate of the find in June.
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