The Asian energy companies sitting on the largest horde of cash outside China are ready to put it to use.
Thailand’s PTT Exploration & Production PCL (PTT E&P) and its parent company have about US$11 billion combined in cash and marketable securities, such as bonds and other short-term investments.
The explorer is ready to spend from its portion on projects and exploration acreage to rescue declining oil and gas reserves, chief executive officer Somporn Vongvuthipornchai said.
PTT E&P is eyeing early-life producing assets or projects that are already sanctioned and ready for development, Somporn said in an interview in Bangkok.
It is also looking to work with its parent, PTT PCL, to invest in liquefied natural gas (LNG) plants, which would help feed the country’s growing demand.
“We’ll have to rely on mergers and acquisitions to maintain our growth,” Somporn said. “We’re looking at opportunities in the few hundred million to US$1 billion range.”
Oil prices had already fallen from the US$100 per barrel range into the US$60s, and he watched as over his first six months they cratered below US$30 to hit the lowest in more than a decade.
He kept the company focused on weathering the downturn by cutting costs and investments.
Meanwhile, proved reserves have fallen from the equivalent of 1.1 billion barrels of oil in 2009 to 695 million last year. That would last just five years at its current production rate.
Oil’s crash made deals difficult to close last year because it was hard to agree on long-term values.
While the market will remain volatile, Somporn said there is enough of a consensus now for buyers and sellers to find common ground.
PTT E&P is using a US$50 oil price forecast this year for its investment decisions.
“It’s a good time to grow while we have this cash with us,” he said.
The E&P company has US$4 billion in cash and marketable securities, which parent PTT accounts in its US$10.9 billion.
Most of the company’s wells are in Thailand and Myanmar, where Somporn is looking first for new supply.
Divestitures by oil majors seeking to maintain dividends in a lower revenue environment provide opportunities to find assets, he said.
Liquefied natural gas is another avenue for growth. Parent-company PTT is looking to expand gas imports to meet growing domestic demand fueled by economic expansion, while domestic production is declining and pipeline imports from Myanmar may be redirected to China.
“There is an opportunity for us to participate more on the LNG value chain,” Wuttikorn Stithit, PTT’s executive vice president for natural gas supply and trading, said in a separate interview. “It’s kind of a natural hedge, because when the price of LNG is high, from the projects we would have some value.”
Somporn said geography does not play as much of a limiting role for LNG projects.
He said he would prefer a project where the export facilities and production fields are combined, as opposed to projects such as those on the US Gulf Coast, where firms buy produced gas and then pay to have it liquefied for export.
PTT E&P owns an 8.5 percent stake in Anadarko Petroleum Corp’s proposed Mozambique LNG project.