Leak may cost PTTEP 6% profit drop

       Profit at the only publicly traded Thai petroleum exploration firmmay fall by 6% this year as a result of an oil-rig leak in Timor, but the overall impact should be minimal, according to stock analysts.
       Oil and gas condensate has been leaking from a well at the offshore Montara field in northwest Australia owned by PTT Exploration and Production (PTTEP) since Friday.
       Vichitr Kuladejkhuna, an analyst from DBS Vickers Securities, said the incident may cost the company between US$10 to $50 million depending on how well and fast it controls the situation and limits the damages.
       "If the damages are in the range between $10-50 million, PTTEP's profit might drop by as much as 6% from this year," said Mr Vichitr.
       But a Tisco Securities analyst said the incident will have only a minimal impact on the company since the damage and the costs of clearing up the spills and fixing the leak should be covered by insurance.
       "As a result of the accident, the production start-up schedule will be delayed from November this year to around early next year," said Chaipat Thanawattano, deputy head of research Tisco Securities.
       "We also estimate that every $10 million of the extra cost from the incident would devalue PTTEP's net assets by 0.1%," he added.
       Mr Chaipat also estimated that unless PTTEP starts the production from the Montara field early next year, its net profit in 2010 would fall by 5%.
       Komsun Suksumrun, an analyst at Phatra Securities, said as PTTEP has insurance coverage for the cost of cleaning up for the amount of $75 million,the impact on its performance will be minimal.
       "The clean-up costs will be covered by insurance while the production capacity of the Montara field is also relatively small compared to the overall production of the company. We would be worried however if the incident could not be contained within the estimated two months, because that would mean the operation will be delayed further to mid-2010," he said.
       Despite the bad news, trade of PTTEP shares on the Stock Exchange of Thailand remained brisk, with 1.42 billion baht worth of the shares changed hand yesterday. The shares were up one baht to close at 142 baht.
       PTTEP chief executive Anon Sirisaengtaksin said the company has done its best to control the situation and limit the affected area. So far, it has evacuated all 69 crew members working in the fire-risk field.
       "The damaged area has been under control. We sprayed dispersant to disperse the spills. The contaminated area is around 30 metres wide and eight nautical miles long," said Mr Anon.
       The company has also closely coordinated with the Australian Maritime Safety Authority (AMSA) to limit the damage to the environment and to en-sure safety.
       PTTEP had planned earlier to start producing 35,000 barrels of oil a day in December this year from the Montara field, which it acquired from the Australian-based Coogee Resources late last year.
       Mr Anon declined to estimate damages of the spill, saying the total costs will depend on how fast the company controls the leak. He said total costs will not exceed the insurance coverage.
       "We will seal the leak well by cement blocking after we have the situation under control," he said.
       The company expects next year its oil-and-gas production will rise to 300,000 barrels a day from 240,000 barrels estimated in 2009. Part of the additional output will come from the Montara field.