Oil conglomerate sets its sights on US acquisitions
PTT Plc, Thailand's biggest energy company, is on the lookout for acquisitions in the US as slumping oil prices put pressure on drillers with limited access to new funding.
"Maybe six months down the road, if oil prices remain weak a number of operators could face difficulties, particularly in the US, where a number of small and medium-sized enterprises have been funded through speculative bonds," chief financial officer Wirat Uanarumit said on Monday.
Oil has collapsed into a bear market as global demand growth slows and US production rises to the highest level in more than 30 years.
In the two years after the 1997 financial crisis caused a slump in oil prices, the value of global deals surged more than seven-fold to a combined US$376 billion, Bloomberg data show.
"The lower oil price will jump-start M&A activity, because it's likely to cause some distress in the market for highly leveraged tight/shale oil producers, as they generally need an oil price of $90 a barrel to service their debt effectively," said Trenton Gaddis, a partner at Singapore's Lincoln Liquidity Pte, which advises on oil asset investments.
West Texas Intermediate crude has fallen by almost a third this year to below $68 a barrel, a decline that accelerated after the Organization of the Petroleum Exporting Countries last week maintained output in the face of a supply glut.
"The Middle East, I think, could actually withstand very low prices, but if I'm not mistaken I think shale oil and shale gas would probably need $60-70 really to break even," Mr Wirat said, declining to name any specific acquisition targets.
"If you go and look at the stock market, you'll see the share prices of some of these companies have gone down more so than others."
He said the strong financial position of PTT, which is two-thirds owned by the government, left it in a good position to take advantage of investment opportunities.
The company and its units plan to spend $30 billion in the five years through 2018, Mr Wirat said.
PTT is Thailand's biggest company by market value and combined with its five biggest publicly listed units accounts for 15% of the Stock Exchange of Thailand (SET) index.
Its stock has gained 28% this year compared with a 13% drop in the 75-member Bloomberg World Oil and Gas Index.
The company may face competition from larger Asian oil companies including Oil and Natural Gas Corporation, India's biggest producer.
It has pledged to spend $177 billion by 2030 to increase oil output, partly through acquisitions abroad.
Fitch Ratings last week said oil's plunge might be an opportunity for Asia's national oil companies to buy assets more cheaply.
Asian nations accounted for 33% of global crude oil consumption last year, followed by North America at 26%, BP Plc data show.
China, Japan, South Korea and India, Asia's biggest economies, must import most of their oil, leaving the onus on their oil companies, many of them state-owned, to secure supplies to bolster energy security.
PTT Exploration and Production Plc, PTT's exploration unit, in April agreed to pay $1 billion in cash for Hess Corporation's stakes in oil and gas assets, adding to its 2012 purchase of Cove Energy Plc's oil and gas assets in Mozambique for $1.6 billion.
Malaysia's Petronas has been Southeast Asia's most acquisitive national oil company, spending $24.5 billion since 1998 including $7.1 billion in North America, Bloomberg data show.
Total spending by PTT Group is about half that, with $2.3 billion spent in North America.