FIRE BLACKENS PTTEP

       Analysts bearish on firm and parent; project may be written off
       PTT Exploration and Production has managed to squelch the
       main fire at its Montara offshore well in the Timor Sea
       and plugged the oil and gas leak, but it may end up having to write off the entire Bt20-billion project.
       Avin Sony, an analyst at Asia Plus Securities, is particularly bearish on PTTEP.
       He wrote in a report on Monday called "Platform Fire Burns Growth" that insurance might not compensate for all of the damage from the fire at the oil rig's platform.
       "PTTEP has insurance coverage that allows for US$75 million [Bt2.51 billion] for damage and clean-up per occurrence, $50 million third-party casualty and up to $143 million well-head plat-
       form insurance if the plat-form is totally destroyed," he said.
       "We believe the total cost for the incident, which is yet to be ascertained, may exceed the insurance cover.
       "Nonetheless, in the worst-case scenario, if PTTEP is unable to control the oil spill for the next two months, we believe it may have to write off the whole project. Total write-off cost could mount up to $600 million to $700 million [amounting to B6 per share]. This, in our view, will remain a key overhang on the stock."
       PTTEP's shares fell 5.11 per cent yesterday to close at Bt130 on investors' concern over the company's misfortune with its Australian subsidiary. Last month, PTTEP hit a high of Bt164 with market capitalisation reaching more than Bt400 billion.
       PTT, the parent of PTTEP, also took a beating yesterday. Its stock price fell 2.15 per cent to Bt228, against a high of Bt277 last month.
       Both stocks account for signi-ficant weighting of the
       Stock Exchange of Thailand Index.
       Brokers said foreign investors have been rushing for the exit, dumping PTTEP by more than Bt10 billion so far. Yesterday, foreign selling continued at Bt2.88 billion, reflecting fears PTTEP might bleed money badly or be hit with environmental lawsuits in its exploration in the Timor Sea.
       "The problem is that PTTEP might not lose just $600 million from its investment in the Australian unit from the fire, which has blackened its credibility, but it could lose more money if it
       had to take on environmental lawsuits. Chevron faced lawsuits from its oil spill amounting to $20 billion," an observer said.
       A Bualuang Securities analyst said in the worst case, PTTEP would shed Bt23 from its stock price as a result of the loss from its Australian drilling unit. That would cut its crude-oil sales 10 per cent to 253,000 barrels per day next year, from an initial projection of 282,000bpd. Its profit will decline 29 per cent this year and 23 per cent next year.
       "But we don't think PTTEP will abandon the Australian operation, since it has about 32 million barrels in oil reserves," the analyst said.
       In a research note, Ayudhya Securities said if oil production were delayed by 18 months to the third quarter of 2011, PTTEP's net profit would decline Bt37.28 billion, or 14 per cent, next year.
       The securities house suspects the fire will also pressure the company's fourth-quarter net profit this year, because the company must book the cost of battling the blaze and massive oil spill.
       The brokerage said it was highly possible production could be delayed, because PTTEP had to consider whether damage to the well-head was too great for production to resume.
       If so, PTTEP may have to build a new well-head platform to replace the damaged one, which would take at least 18 months.