PTT Public Company Limited (PTT) Earnings Call Transcript & Summary

Good morning, analysts, fund managers and PTT staff. My name is Tarinee from Investor Relations of PTT Group. Welcome to PTT Analyst Meeting for the second quarter and first half of 2026 to express gratitude and condolences to [indiscernible]. We would like to invite you to stand up and observe 1 minute silence. Thank you. We will present Q2 first half results by CEO and CFO, followed by Q&A. May I now introduce top executives. Joining us today, starting with CEO, President, Kongkrapan Intarajang; CFO, Pattaralada Sa-Ngasang; and joining us during Q&A are Khun Bandhit Thamprajamchit, COO, Upstream Petroleum and Gas Business Group; Khun Prasong Intaranongpai, COO, Downstream Petroleum Business Group; Dr. Buranin Rattanasombat, Chief New Business and Sustainability Officer. May I give the floor to the CEO.

Good morning, everyone. Q2 and first half performance. I will share highlights starting with global energy market disruption and PTT in action. We will tell you what we've done during the crisis, which we continue these actions and performance highlights and strategy, I may not say all details, but I will share what is going to be sped up in light of recent review and cautions going ahead. Let us start with global energy market. We have listened many, many times before in some disruption still persist and our take is that there is no guarantee it is going anywhere soon. We have to monitor closely daily and weekly. The fragmentation of trading remains the same and possibility of oversupply is still there as everyone seeks their own protection. And there might be some enabling factors such as AI investment, but we have to see which segments and governments around the world implement policy support measures, but how sustainable these are, we have to watch. And for sure, crude prices remain strong in light of uncertainties, volatility and importantly, supply from Yanbu, Fujairah have constraints, limitations. We have imported from outside Persian Gulf. But as we see from numbers, there remain limitations. Therefore, challenges remain cracks refined products, gasoline, diesel, jet fuels due to capacity being wiped out, diesel more than 1 million KBD. So 800 actually KBDs refineries is quite substantial in Saudi Arabia. So these patterns continue, be it the source, diesel, gasoline, crack spreads, margins are high. Diesel jet, gasoline, as we know, EVs have eased its effect. gas price remain high relative to crude is better. U.S. has a lot of inputs. U.S. and others can still boost production. Now what PTT Group has done our own. We are state enterprise listed in the market. So we have to strike the balance. We have to be good. We have to distinguish ourselves, not profit-oriented alone. We have to make sure there is no shortage, but at the same time, we have to perform well in light of our shareholders' interest. To the left, during March, April, when we worked on supply in light of our investment over the past 5 years in the tune of more than THB 100 billion, why to achieve flexibility of refineries and expand global trading networks. And as a result, it is a major consideration for our future investment. Investment for energy security takes into account risk profiles. returns may not be high, but if it guarantees security, so we blend with high-return investment. So that is -- that forms our approach. Second, crude supply because we've been working all along, so we can -- we have the flexibility to go outside the Gulf. But over the long term, we have to diversify sources, U.S., West Africa, Strait of Hormuz same we buy outside straight 30% compared with 60%, 70%. So to the left, is still effective. But to the right, we try to incorporate in the future, the factors for consideration. During fear of shortage, we maximize diesel refineries. Our refineries have been excellent serving petchems, we can run, but we are restricted by export quota, certain things we cannot export. So on average, the group rate is at 90%. So that's partial opportunity loss. Continuity of petchems, we well, Thailand is among a few in Asia where we can maintain capacity. China has shaved off a lot, resulting in supply shortages and improved margins for certain products. And we have to strengthen integration. So we have gone full-blown refineries, petchem integrated. So we can proceed and gas, we speed up domestic gas supply seeking new sources in Thailand, Malaysia and beyond. Even in Myanmar, we see progress apart from new alternatives LNG cargoes we have to continue. It would sound -- well, crisis and future don't sound so different as we focus on our core business just the same. Liquidity is very important as CFO will share with you, higher cost, more than THB 400 million so core margins, a little bit less, so down to THB 40-something billion. In any case, we are affected by oil fuel fund outstanding up to THB 43 However, we have liquidity preparedness in light of fluctuations of circumstances. We've been transparent from the start. We posted our digital supply chain, production, storage, export. We make that clearer, expanding. Let's take a look at performance highlights. CFO will explain more details, but -- the pie chart in the middle, second -- first half income, THB 78 billion. So contributions have become balanced. When we talk to investors, our story is our risk profile balance from upstream to downstream. PTTEP has delayed from Q1, but now given its gas dominance and time lag, so Q2, you see improvements, gas, petchem margins are sound. China's capacity due to feedstock shortage. Supply is eased, looking at polymer aromatics, but things still look good in Q2. Refineries margins are sound. However, within THB 78 billion, we have enhancement, profit enhancement initiatives group-wide, and we continue efforts we achieved about THB 8 billion in 2 quarters credit ratings, we prioritized last year, we helped subsidiaries. This year, we remain solid in our credit rating intercompany loans. We continue dividend is not in the Board yet. Maybe early September, we can announce. Again, we support the government by about THB 10 billion. Our role as a listed market, we have to compare with peers. Global energy companies, their performance has improved from 20% to 100%, depending on their portfolios, maybe more waiting for upstream or downstream, things vary. But overall, we performed well. despite mission to support the country, we improved by 75% by sector to the right, Thai oil versus peers, OR versus peers, there is issue with margin loss, petchem, healthy margins. I already explained, but this graph just to share references. First half this year, last year, net income improved by 75%. And there are certain extra items, but not a lot. The key elements, EBITDA from petchem and refineries, healthy spreads, E&P good. Sales volumes are good, margins improved despite the hedging losses, gas improved also lower cost, selling prices better. Trading performed well, Q1 low, but Q2 up. Global trading during volatile times generated profit. retail some issues, certain impairments, refineries, petchem, higher net income mean higher tax payments and CFO will share details. Now our strategy, may I recap Positive outcomes today are a result of efforts at reshaping. It's not overnight success. So from 2024, we refocused strategy, focusing on core business. At the same time, the decarbonization efforts continue to well, back then there's no energy crisis, but the focus on core business makes us ready to take actions instantly, and we allocate some capital for decarbonization. That's the story. Non-hydrocarbon, we have done smartly. We exit and keep some good ones by 2025, we set targets 2025 story is about finding new growth engines, LNG partnership, decarbonization and this year execution. So a crisis has motivated us to execute promptly. Now this year, revisiting strategy last month that we have to look at megatrends with game changers now in the picture. There continue to be add-ons, [indiscernible], Russia, Ukraine. So energy trilemma still stands, balancing security, affordability and sustainability. Security now stands out, but we cannot neglect affordability and sustainability while seeking opportunity, not reactive. So balancing element, EBITDA, net profit must grow at the same time, we must decarbonized. So more difficult, but we continue just the same, focusing on competitiveness enhancement and growth, both hydrocarbon and power and non-hydrocarbon business. The green yellow parts, these are all LNGs are opportunities we must speed up because we are ready to capture opportunities, AI and tech. And connected to government. We have to proactively work with the government. Yellows mean fine-tuning. We have to adjust targets. For example, CCS, we must look beyond Thailand. Some projects we may slow others. We speed up CCS is government's priority. We adjust our plan accordingly. Asset monetization, we continue, but external factors may slow down or speed up our partners. So we work on that. Upstream things stay the same. Thailand neighboring countries, spite gas is most important cheaper than LNG. PTTEP must go beyond Thailand, cut costs unit cost, while the green parts partnership with government and LNG, we maintained our target 10 million, 15 million tonnes per annum, but we speed up in light of opportunities. We have already mapped supply sources where we are after we worldwide where it's good, we may not have opportunity. It could be buying, it could be co-investment. We already have road map in our pocket. demand side, China, Japan, Korea, we identify opportunities and our value proposition. We don't produce LNG, but our strength is -- we have infrastructure. We have the size and scale amongst world's top 10. So we have physical assets. We have business acumen, how to maximize our position we are developing. So things are progressing as planned. Now existing businesses, petchem competitiveness remain the same. We have to calibrate partnerships, for example, Genesis. There are 2 factors, trade of and government intervention, which slow things down. And infrastructure, we refine in light of opportunities in ASEAN, we can we play the role in neighboring countries where they're not in the position to invest for us to supply an OR, we are fully aware of solid and sharp business plan because from IPO OR needs growth the mandate of being Thailand's mobility partner stays. And so this slide details about Genesis. We continue to talk to partners different speeds because state of homes is a decisive factor. So people no longer put all eggs in one basket. So diversifying capacity is important. So that's new factor apply slowing has to do with refinery margins reduction, challenging for their financial models. GC, SC, JC good progress. My team will share details. But as shareholder, we continue our support. Having national champion is good. We -- well, it's due diligence period, but we support. For other things to increase the competitiveness in the EV value chain, we check and try to be more flexible. For example, if there is some difficulties, we would do the exit strategy. But for the potential growth like EV, e-mobility, like e-mobility, we would expand it. For Life Science, growth should be through self-funding because we are the oil company, we cannot make decision for them. So for the process, it should be well governed. So we would try to help them by deconsolidate some portion. So they can raise fund in the U.S. and they can grow by themselves. So we would act as a good investor. They would do the restructuring. And for the new ventures, we align more in our group, and we spend money less than 50%. So this is the -- what the investors told us from day 1 that we don't need redundancy. So we have to focus on the streamline for some business, we have to exit. For decarbonization, we see a good progress like ATI, we talk to the government with the same old target. For the investment overseas, we have to fine-tune ourselves because there's a lot of changes and adjustment in CPS in Europe. And for this one, I-Spark, this is a sandbox. We actually, we already do this but we just package and bundle all these so that we can see the whole picture. So all the businesses should be linked with sustainability and decarbonization. We look into the infrastructure to serve low carbon business. We do that at Map Ta Phut. We use RE and prepare to build the infrastructure for carbon capture in order to reduce the carbon footprint. So this is possible, and we just do it in the site that we can control. And we focus on 2 keywords, feasibility and flexibility. CCS and decarbonization should also serve our existing business. And for flexibility, we plan by scenario base and [indiscernible] driven. For the enablers for transformation, we still maintain our triple transformation, Mission X, operational excellence and the most important component is the mindset. We have to change the way we work, and we are going -- we are doing quite well on this. The second transformation is AI transformation access. We have target our personnel with exact figures. For HR, how can we increase the level of our agility and to cut cost, right? For the retiree, they might have a smaller package. Our CFO is both reactive and proactive at the same time with our credit rating, maintenance, deliver strong ROIC and deliver shareholder expectations. DRC in the middle here is quite important. And we cannot make it happen if we don't on this. We are careful before we make a decision to invest because there are challenges and the level of risk is higher. So we take in mind PTT and also the nation. This is our target, which we will update it every quarter, short term, medium term and long term. For the short term, you would see the figures during the past 3 years. P1, only half year, we got THB 12 billion because P1 is crude sourcing to optimize our profit. In order to export products, we join hands with subsidiaries in the group. So we can encounter flexibility more and we can optimize among ourselves. And D1 is domestic transaction. We synergize among our group. So we are doing close to our target, THB 800 billion already. Mission X is the cumulative number. And half year, we got THB 24 billion already. Our target is THB 30 billion. AXIS is AI knowledge infrastructure. So we don't see much money here, but we are still maintaining it. And for our long-term target LNG growth, half year, we got 1.75 million tons. And all the others are in line with our target. For asset monetization, A1 cumulative half year is THB 18 billion. So this is all the big projects in PTT. F1 is finance, we have about THB 500 billion already. Before I end and give the floor to the CFO, may I share with you our celebration of our 40th anniversary because this is quite meaningful for us and our stakeholders, the community, the shareholders, you would like to make it applicable for them. So we would like to showcase our activities and achievements in gas, national energy security, mobility partner, corporate social responsibility and also to promote the Thai economic growth. And for the future, our growth is quite a big market cap in the stock exchange in Thailand. So we would like to add the value to our business and our partners. So what we did in the past is recognizable. But at the same time, we have to focus in our future as well. And we would like to make sure that, first, we can be sustainability transformation leader, but we have to balance between sustainability and profitability. So during our transformation, we focus on our trilemma sustainability, profitability and affordability. And for the growth, we have to be the national champion. Our revenue is -- over 50% is from overseas. So we have to go beyond Thailand. For example, trading of PTTEP or petchem, we are exporting our products to more than 100 countries. Also, we want to be a purpose-driven CSR company. We want to strengthen the community surrounding us. We don't want to give only money, but to help them to create their own brands using technology. And last but not least, we are focusing on technology integration in business as well, like CCS or either -- or even SMR in the future. So we have to be the leader in the technology as well. So for the whole year, we would have the 4 movies to strengthen our 48th anniversary. Thank you very much.

For our 48th year anniversary of PTT, this is one of the year to prove that BCM and the strong foundation are important to strengthen the performance of PTT to end at THB 78 billion, which is the highest for half a year -- the highest was in 2017. But for this year, THB 78 billion is only for half year. We might not be able to double the number for the latter half of the year, but we are doing our best to make sure that we are in our top 4. Now looking at our consolidated performance. Looking at the top line, now we have reached THB 1.5 trillion already, mainly from the crude oil price and the energy price of the world. And also, we see better spread in petchem and oil products. Looking below, we would see the upstream P&R in pink, Oil and retail in orange, it is scattering and trading is getting most space because they are doing both importing and exporting. For EBITDA and the margin for the first half of 2026, that's THB 200 billion something compared to Q-on-Q, it's increased from THB 115 billion to THB 165 billion. In Q1, Dubai price rose to -- rose sharply at the beginning of the year. So we have the stock gain despite the hedging loss. But in Q2, it's dropped down. We still have the stock loss -- so if we look into June 30, Dubai price is down to THB 68 from THB 121. So the figures told us about the normal situation. But still, the spread is quite strong. So in Q2, the EBITDA is firm enough. So we include the stock gain/loss and hedging gain/loss. Have you read the headlines of the Dubai price today? Last week, it's THB 88. And today, it's going up again to late 90s. So we would see the incidents in the Middle East nowadays. But in the end, we have the net income of THB 78.26 billion. And in Q1, it is THB 52 billion. So that's because of the strong spread with not much hedging loss. Now for the breakdown of EBITDA and net profit, this is quite a beautiful picture for us in that when we break it down, it is a well spread and they can offset each other. Like last year, P&R is not so good. So we have EP and upstream to help offset. And for this year, the breakdown looks very good. And I would like to see this breakdown every year. Well, last year, for the first half, we ended at 40 billion, the gray one. For the blue one, we exclude the impairment. And this year, it's THB 78 billion. Down here, P&R, even though it's greater by 10x. But if we add it up and divide it by 2, because I said this because we cannot look at 1-year figures. in some years, we don't have cash at all at its negative value. But for this one, we do not expect it to happen like this for the next 5 years. But anyway, if you look at the spot figures here, it is doing much better because of better spread. EP is better with oil and gas. PTT only is also getting better because of gas and GSP. For others, mostly it's PTT LNG and PTT trading. For extra item, the details is here. For the first half of 2026, it's negative value because some of the businesses like petchem, GC Polyol and Thai Oil, they have partial impairments, some of their assets according to their restructuring plan. But for last year, it is positive value because we recognized some bargain gain and that's happened in Singapore. We divested to Indonesian investors. So we have the accounting positive figures. So when you exclude all the extra items, you see that it rise from THB 44 billion to THB 82 billion. And right here, it's a breakdown of BAU, that's THB 64 billion. This THB 64 billion includes the subsidies from the government as well, like diesel price cuts or fixed TRM. So that's about THB 8.5 billion. So this is the BAU portion. What we did more is in our operation, Mission X, T1, D1 and F1, that's THB 7.7 billion, cost cut, gain on bond buyback. So all of these is THB 8.7 billion. And others are other accounting items and stock gain and FX loss. For the second quarter, we would like to break it down. We see that a lot of recognition is from the margin and less hedging loss. Hedging loss in Q2, we have experienced managing the stock gain/loss since 2021. So when crude oil price rose up, we just cut off from Q1. And then in Q2, we see the positive figures already. So experience help us to forecast the trend. So we do the hedging and know when to exit. For OpEx, it's increased by a little bit because of the transportation cost in trading because the product price is going up. DD&A is demolition in our upstream projects. Other income is down as we recognize less extra items. Impairment is getting better. In Q1, we impaired quite a lot. So it's a less figure in Q2. Most of that is the tax expenditures because we sell more. For P&R, in Q2, it's THB 12 billion and Q2 this year, it's THB 14 billion. So P&R is up by a little bit. Now breakdown into each sector. NG price in this graph, it's going up both for average pool gas price from Q1, in line with the world price. High sulfur crude oil is -- fuel oil is also increasing. Volume increased by 7%, in line with the demand from the generators, SPP and ITP, they also buy more gas. Down here is the key driver of the gas separation plant. We will see that petchem prices is going up as according to supply disruption. And petchem spread, LDPE, HDPE are going up from Q1 to Q2. And for the feed gas cost, because of the price adjustments, the prices maintain and quite stable, except for LPG. So for the revenue, it's linked with petchem prices, while the cost is reflected more fair price. So that's about USD 400 per ton. U rate is increasing according to demand from the generators. EBITDA of gas to the right, first half of last year and this year, it's up by 51% Q-on-Q and year-on-year. Look at the light blue, GSP, feed gas cost is not up so much. But for the average selling price, it's getting better in line with the petchem price. CSO is down by a little bit because of TC rate, which is down by a little bit. And some of the customers, the contract expire. SMT is quite stable, but we have the fee day, which is booked at the beginning of the year. So all in all, we see better performance. trading business in Q1, we were quite sad in quite 1 because of the negative figures. And that's because we cannot book the profit from our crude to sell to our refineries and petchems. But when the sales was not completed, we cannot recognize the margin and it appear as a cost. So we see the accumulated figures. But in Q2, when we sell these products, we can recognize all the margin. So if we have a lot of transaction from our subsidiaries, we can see significant margins in Q2. But concerning the price, the gross margin of PPT trading is getting better according to the spread and energy prices. Concerning the sales volume in order to serve domestic customers in Q2, since 28th of February, the facility in Thailand would be optimized. So our trading, the volume would be down because we focus domestic more and pricing is getting better and margin is getting bigger. That's why PTT trading first half of this year compared to last year is doing better more than 100%. Our financial position is as expected because we know that if energy prices is better, U rate is good with a better spread, better margin, net working capital would be higher and the current assets and current liability would be up in parallel. So net worth would be higher, the gray zone and the dark blue is bigger. Performance is bigger and cash would be better as well from THB 400 billion to THB 425 billion. For PTT only, it's THB 120 billion. And loan, the debt is rising as well because we don't want to wait as we have liquidity enough and we are quite a big group with long value chain. So we don't wait to be the last person in the queue. So we contracted commercial banks, both from PTT and subsidiaries to take more loans, working capital to PTT Trading, PTT and our subsidiaries. So we utilized these lines already in the quarter for the whole group, that's THB 140 billion. But at the end of the quarter, when we get more money back, we have the loan about THB 60 billion altogether at the end of Q2. But now as the price of the oil is about THB 96 already, we might consider taking more loans. Down to equity, it increased from THB 1.6 billion to THB 1.8 billion from 3 major components. The first one is the net income, THB 78 billion, payment of dividend. And the third one in Q1, Thai Oil issued [indiscernible] bond and perp bond portion, THB THB 60 billion would be recognized. So out of these, our ratio looks beautiful. And I just talked to all the credit rating companies. Thai sovereign is stable and PTT and PTTEP is stable in line with the sovereign. But for petchem and refinery, they are facing difficulties. So we help them with ETC, so they can maintain their rating. Now with a better spread, they still have the question towards PTT. The major question is whether we would maintain our ETC scheme and for the A1, would we maintain its rule would say that net debt-to-EBITDA should be kept at 2 because PTT should be strong before we give help to our subsidiaries. If our ratio is our investment-grade BBB+ and stable outlook, then we can take care of all this. EPC for us, we look at it as the working capital. We review it every year and we roll out every year. This is not our permanent line. This is the true nature. So we would like to credit rating companies that we are stable enough. And this is the cash flow in the first half of this year. To the right, the operating cash is quite strong. It's THB 100 billion. We pay some taxes. So we paid the tax at THB 35 billion. that's going to the government. We have changes in assets and liability. This is our working capital. It increased by THB 165 billion in the first half. So we have to reserve this kind of cash. And if our -- with our business growth, working capital would be bigger. So we have to rely on the analysts to give the confidence and trust in PTT Group, and then we can take more loans. Investing CapEx is THB 94 billion with PTT and CFP of Thai Oil. We also have some long-term investment, which is cash. We take the loan and we pay the loan at the same time. Dividend, we paid about THB 50 billion. So we paid THB 35 billion tax, THB 50 billion dividend and tax and some interest payments. Also, we issued some bonds. So that's THB 18 billion. For PTT Group guidance, this is the guidance for the second half, but we are in August already, but our spread is still strong. CEOs of the flagship companies, they just announced their performance with smiles. So everyone is happy as of now. So we have 4 months left -- and we just hope that this strong spread for the remaining time, so we can offset the stock loss, if any. And the Dubai price at USD 96, and we are not sure about the price in the future. If the stock loss at the end of the year, if there is any, at least we have the healthy spread in hand. So that's why we just put all the plus mark here. Now coming back to our projection. Well, this year, we stay at THB 90 billion with this THB 90 billion, we have encountered the price structure, shrinking GDP, down cycle of petchem and refinery. If we still stood at THB 90 billion, we have to make the revenue of THB 200 billion. So in the future, we would like to make sure for our short term and long term, how can we deliver return for our shareholders. And for these few years, we consider our dividend payments according to what we have on hand and also to serve our shareholders' wealth as well. For treasury stock, we are doing the excess cash to do treasury stock, both this year and for next year to enhance the yield from our excess cash. But saying so, we are taking care of the level of risk as well. And for the subsidiaries, we would step in to help them with new financing packages to cut down on their financial costs, and we just hope to get the support from all the trust. For the Dump plus, we would do this with the Stock Exchange of Thailand. We did it from Q1, but then we faced the war. So we have to delay it a little bit. Some of these pictures, we have never shown it before. We are interacting with the banks, and we would like to consider all types of loans. And if you never come to us, I would reach out for you because we want to make sure that we can maximize all of the assets that we have and possibility for us to manage our costs. And also, we would like to build relationships with all the financial institutes and the analysts. In March, we saw your analyst messages which is realistic and supporting us at the same time. Thank you very much. And for the analysts, this is for analyst presentation. Next week, September 10 and 11, we would go to the East green -- clean field project of Thai Oil. I was there 6 years ago. And now I would like to take a look with my own eye. And at the same time, we would go to visit PTT tank terminal -- apart from assets centralization, we would like to look at our tank terminal there. And for the banks, we also would like to have some activities with you, and we would send out an invitation letters to invite all the banks to celebrate the 48th year anniversary of PTT with us. So we are strong as we are reaching our 48th year anniversary. So thank you very much to our governor, to our executive officers, analysts and all financial institutes. But PTT is 48th. But for me, it's 6 year, and this is the last time that I would be here in the PTT analyst. So I'm so happy that we have shared and spent time together. Thank you [Statements in English on this transcript were spoken by an interpreter present on the live call.]