• PTTEP booked US$550m impairment charge for Marina Oil Sands Project (MOSP) in 3Q17
• Expect PTTEP to report core profit of Bt7.4bn and bottom line loss of Bt11.0bn in 3Q17
• Maintain NEUTRAL rating and Bt88/sh TP. Winning the bids and successful asset acquisition are two factors that will turn sentiment on share prices

Booked US$550m impairment for MSOP

PTTEP reported to the SET yesterday that it would book impairment charge of around US$550m in 3Q17. The impairment test is required by accounting standard when there is a significant change in asset value e.g. oil price, development schedule, production and cost profile, etc. For MSOP, the trigger point for impairment is the revision of development plan and the delay of project sanction. These come from the results of studies to reduce break-even cost and commercial feasibility study. Net book value (NBV) will reduce to US$45m after impairment. The impairment is based on LT oil price assumption of US$70-80/bbl. PTTEP had impaired MSOP for US$630m in 4Q14 and US$626m in 3Q15. The impairment is a non-cash item and will not affect cash flow. It can be reversed in future if there are trigger points that make NPV higher than NBV. There is no trigger point to impair any other projects at the moment, including Mozambique LNG.

Expect 3Q17 bottom line loss of Bt11.0bn

Sales volume should increase 4% qoq to 292k boed, while gas price should be flat qoq at US$5.6/mmbtu because of quarterly price adjustments for Myanmar projects based on previous three months’ oil prices. Liquid products also edged up US$1.8 qoq to US$50/bbl, contributing to estimated ASP of US$38.5/boe (+US$0.4 qoq). Unit cost should be flat qoq at US$29/boe, slightly lower than guidance at US$30/boe. We do not expect major write-off expenses and assumed US$10m in our model. The stronger THB against US dollars should lead to US$60m extraordinary gains. We expect PTTEP to report core profit of Bt7.4bn and bottom line loss of Bt11.0bn in 3Q17.

Maintain NEUTRAL, DCF-based TP Bt88/sh.

     We see no near-term catalyst for PTTEP, except the progress of upcoming bids for Bongkot and Erawan, which the government should complete the TOR by the end of this month. Then, the data room