Q4 2018 PTT Exploration and Production PCL Earnings Call

Jan 30, 2019 AM UTC 查看原文
PTTEP.BK - PTT Exploration and Production PCL
Q4 2018 PTT Exploration and Production PCL Earnings Call
Jan 30, 2019 / 07:30AM GMT 

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Conference Call Participants
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   *  Mayank Maheshwari
      Morgan Stanley, Research Division - Research Analyst

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Presentation
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 Unidentified Company Representative,    [1]
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 (technical difficulty)

 from 305,000 barrel per day to 320,000 barrel per day, basically from the higher nomination from our key projects like Bongkot. And of course, the sales -- the average selling price is a little bit higher despite the decrease in the oil price because of the gas price adjustment. So that makes our average selling price still strong. And then the other expenses are in line with the volume, the operating expense, the depreciation. The only expense that seems a little bit extra is the income tax expense. Of course, I mentioned, the USD 74 million of the deferred tax already. The others are the recognition of the deferred tax asset of Montara. As you know, we have sold Montara, so we have to reward that deferred tax asset that comes with Montara. So that's USD 54 million. And the other significance is that in this period, Q4, the Thai baht-U. S. dollars, the exchange rate is quite stable, whereas in Q3, the baht appreciated at 0.5. So we have the gain, meaning that the minus impact around USD 76 million. And the other extra expense that come in Q4 is the loss on divestment of Montara at USD 21 million. This expense related to Montara because it -- in the -- it's the maintenance in the period of transfer operatorship in Q4. So this is to be in line with the Australian government standard. So we had to do the maintenance work during Q4 to be able to do the transfer of operatorship. So we incur around 25 -- USD 21 million in Q4 in expense. So that concludes the formal update income at USD 269 million in Q4.

 For the year, as I mentioned, with the strong volume and strong price, the net income is USD 1,120 million, with recurring of USD 1,215 million. The volume, mainly an increase coming from mobile acquisition of 22%, with a higher nomination in Contract 4. This is offset with the Montara divestment. With the sale price, of course, the increase in the oil price fired up our sale price by 20 -- almost 20% to now 46 -- USD 47 per barrel.

 On the expense side, the depreciation is higher from the higher volume but also from the Bongkot acquisition at 22%. So that's the summary of the 2018 financial results.

 Let me turn to Page 3 on the detail of volume and pricing. As I mentioned on Q4, the volume has increased, especially from within Thailand -- in Gulf of Thailand. It has increased about 10% from the higher nomination from PTT in this quarter. And in 2018, with the Bongkot acquisition, the volume has increased, about 4%, from 2017. With that pricing, the gas price remained strong at Q4 at $6.9 per 1 million BTU. As we have mentioned before, in -- October 1 is the time of the gas sales agreement reset, the formula reset. So it will reflect that past increase of the oil price. So it is quite strong at $6.9 per MMBTU. And the liquid is in line with Dubai. So that's a decrease from Q3. However, the weighted average selling price is still about the same, a slightly increase from the help of the gas price.

 On the picture of the year 2018 in the oil pricing, you can see the gas price has increased a lot, in line with the increase in oil price as well as the liquid price. In terms of the mix, of course, we have -- still have majority of gas and now with a little bit more gas at 72% and a little bit less liquid at 28%. We see this trend as we are not having Montara anymore and have the 22% stake of Bongkot, which is a gas deal. So we see around 73-ish for the gas volume in 2019.

 In term of cost, on Page 4, over the year of 2018, we are able to maintain the cost at -- along in line with the guidance at around $31.7 per barrel. The main increase from 2017, as you see, is depreciation. Of course, from $15 to around $16.5. Roughly about $1 that comes from the acquisition of the Bongkot, 22%. And the other obvious increase is royalties of cost that is in line with the sales revenue.

 About Q4. The depreciation has decreased a little bit from Q3. Q3, we had depreciation at $17.7, while Q4 is around $16.4. That's the effect of not having Montara. So we don't have that big depreciation in our in expense in Q4. And G&A is slightly increased in Q4. But that's just normal for Q4 when we have over and under-accrued adjustment in G&A. And so that makes the Q4 unit cost at around $32.7. And then, you will see, on Q1, we expect around at this number, at $32 per BOE as well for our unit cost.

 On Page 5, we mentioned about net income already. I just would like to point out on the EBITDA margin that we are able to maintain EBITDA margin at 73% in 2018, so -- which is in line with our guidance at 70% to 75% within that range.

 On Page 6, that's our balance sheet. In 2018, we did some debt repayment of around USD 1 billion. So that decreased our interest-bearing debt from around USD 3 billion to USD 2 billion. So that also makes the total debt-to-equity decrease. This ratio, the gearing ratio, decreased from 0.2 to 0.16, which is very well below our threshold of 0.5. So we have quite a healthy balance sheet.

 On Page 7, we have the cash flow. Operating cash flow comes in very strong at USD 3.3 billion, comparing to 2017 that -- where we only have USD 2.7 million -- USD 2.7 billion in operating cash flow. And then, of course, the CapEx. This year, we have, besides the management CapEx around 1 billion-ish this year, this 2018, we have the purchase of Bongkot, 22%, which is around USD 1 billion. With that comes with a free cash flow around $1 billion. And we have the debt repayment around $1 billion as well. And the dividend at future around $550 million. So that makes the cash in negative only around $500 million. But we have a very strong beginning balance. So we're ending it with still strong position in cash, around USD 4 billion.

 In terms of dividend on Page 8, we have announced the dividend already at 55% payout ratio. We have paid THB 1.75 per share. So we still have to pay THB 3.25 per share after the AGM approval in April for the performance of 2018.

 And on Page 9, there goes our reserves at year-end 2018. For P1, on 2018, we end with a higher number. That means we are able to replace more than we produced, mainly part of it from the acquisition of Bongkot, 22%. And also, another part of it is from better performance of the wells in other projects like Arthit, MTJDA and Contract 4 as well. So we have better reserve replacement ratio at 0.74x in 2018. This -- and the mix of our reserves are still the same: mainly gas, 80%; about 25 -- 20% is oil. And of course, where we have oil reserves is in Thailand, about 70%, and 30% mainly in Myanmar. And this profile, as you know, has not included the results of bidding of Bongkot and Erawan in these numbers yet.

 On Page 10, that's the financial outlook for 2019. The company forecast that for the sales volume, as we have guided, for 2019, for the year is 318,000 barrels per day. In Q3, at around 309,000 barrels per day. A slight decrease from Q4 at 220,000 -- at 320,000, mainly because of Bongkot South that has been shut down since early December. So it will continue for the shut down until mid of February. Yes. So mid of February, we can start the Bongkot South production. So that has a 1.5-month effect in Q1. So that's the volume.

 And price. We still see strong gas price at $6.8 per MMBTU across the year and the unit cost at $32 per barrel, EBITDA margin at 70% to 75%. And of course, of this, we have the assumption of the Dubai oil price at $60 per barrel.

 So with that conclusion, 2018 is a strong core earnings year for us from pricing that is much better and from the volume that came in higher than 2017 as well. That resulted in a strong EBITDA margin. Still lots of cash, healthy balance sheet with a low gearing. And of course, the dividend, as we promised to the shareholders, at a payout ratio of 55% for 2018.

 So that's our brief. If you have any questions, feel free to ask.

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Questions and Answers
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 Mayank Maheshwari,  Morgan Stanley, Research Division - Research Analyst   [1]
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 Mayank here from Morgan Stanley. A few questions from my side. First and foremost, I think you kind of mentioned in the MD&A that you were trying to do something in terms of hedges, et cetera, for getting ready for IMO. Can you kind of just detail out a bit more on what you are planning to do with that for 2019? The second question was more related to volume. And you said you had this entire increase in volumes in 4Q because of higher nomination. But can you just delve a bit more on how we are thinking about nomination for 2019? And despite the shutdown in projects that arise there, how are you thinking about volumes for 2019? And how you think you can continue with that kind of guidance, which you gave us last year for 2019, despite the nomination and where the oil prices are coming through right now?

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 Unidentified Company Representative,    [2]
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 Okay. Hold on a second. Let me answer number two first, Mayank. In our guidance of the volume, we have -- the company has incorporated the anticipation of lower nomination from PTT in that already. So we are quite certain that this number is a realistic number from having experienced low nomination in 2017 and '18. So we think this is a realistic number that we have incorporated in the guidance already.

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 Mayank Maheshwari,  Morgan Stanley, Research Division - Research Analyst   [3]
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 And ma'am, what is the long-term oil price you are using for 2019 here when you are kind of giving us the nomination numbers? Because that will have an impact, correct?

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 Unidentified Company Representative,    [4]
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 We're using around $60.

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 Mayank Maheshwari,  Morgan Stanley, Research Division - Research Analyst   [5]
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 Okay, okay. So you think you can kind of maintain that level of volume despite, I think, in the first half your pricing will be a little less competitive compared to the pricing which you're getting from the other places because you will be coming off from a high level?

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 Unidentified Company Representative,    [6]
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 Yes.

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 Mayank Maheshwari,  Morgan Stanley, Research Division - Research Analyst   [7]
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 Okay. So back...

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 Unidentified Company Representative,    [8]
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 And then, from -- sorry. Go ahead.

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 Mayank Maheshwari,  Morgan Stanley, Research Division - Research Analyst   [9]
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 No, no. I was just asking in terms of when you look at 2Q, you think you go back to the 320k-plus levels?

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 Unidentified Company Representative,    [10]
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 We have incorporated in each Q the -- how PTT will call the nomination. So basically, PTT usually tried to call the higher nomination in Q1 and Q4 and a little bit lower on Q2 and Q3, yes.

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 Mayank Maheshwari,  Morgan Stanley, Research Division - Research Analyst   [11]
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 No. I think that's -- so that's the seasonality. But when you look at -- you did 3Q -- 4Q at 320,000. And when you look through your guidance for 2019 and starting, we are already seeing a shutdown in 1Q because of various factors. Do you think you will be able to get to that guidance considering the levels that you're kind of seeing? 2Q will be lower as well as your -- or that phase will be a bit higher. So I'm just trying to kind of see of how you will be able to achieve your 2019 target.

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 Unidentified Company Representative,    [12]
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 We still see across the increase in Q4, just like what happened in 2018, yes.

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 Mayank Maheshwari,  Morgan Stanley, Research Division - Research Analyst   [13]
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 Okay. So it will be very back-loaded is what you're saying?

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 Unidentified Company Representative,    [14]
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 Back-loaded, and of course, no shutdown of Bongkot South. So that will come a lot in Q2 and Q3. It will come back, I mean, comparing to Q1.

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 Mayank Maheshwari,  Morgan Stanley, Research Division - Research Analyst   [15]
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 Okay. So basically, Q -- like just because Q1 guidance. So basically, if you kind of get Bongkot back up, so that should be more back to 315,000, 320,000 range?

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 Unidentified Company Representative,    [16]
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 Exactly. Yes. Okay. And about the hedging, [indiscernible] will answer you about that.

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 Unidentified Company Representative,    [17]
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 Okay. By now, we're starting the IMO 2020 actually. It's going to impact our gas price of just 1/3 of the price formula and there is a lag time for 6 to 12 months. So that's -- what we are starting now is to bid first with PTT to realize the price that we want as we do have the new index that's under the PAC that's going to link to the Dubai. But I would say, honestly, it's hard to achieve that target. So we thought looking to enter into some contract to lock the spread swap with the Brent. So that's why this year, we enter into that such kind of swap trade for a certain volume that's going to lock our gas price to -- trying to minimize the impact and maintain the level of the current gas price.

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 Mayank Maheshwari,  Morgan Stanley, Research Division - Research Analyst   [18]
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 Okay. And I think -- so just to get a bit more clear on this. So what you're saying is 1/3 of your gas price is obviously linked to fuel oil price? That, I think, is well flagged. But how are you -- like, so basically, you're saying that PTT is not in a position to renegotiate contracts until 2022?

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 Unidentified Company Representative,    [19]
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 Yes.

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 Mayank Maheshwari,  Morgan Stanley, Research Division - Research Analyst   [20]
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 So you will have to find alternative ways to do that?

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 Unidentified Company Representative,    [21]
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 Yes. We are discussing with PTT right now. But as I said, it's hard to achieve that kind of discussion. So we think about the instrument that's going to protect our gas price and one of that instrument is to lock the spread swap.

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 Mayank Maheshwari,  Morgan Stanley, Research Division - Research Analyst   [22]
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 So what -- just to kind of reflect, kind of think about -- because this will be -- because some of these contracts are pretty long dated, so you will have to kind of hit that impact till 2021, '22.

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 Unidentified Company Representative,    [23]
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 Yes.

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 Mayank Maheshwari,  Morgan Stanley, Research Division - Research Analyst   [24]
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 But I don't know how liquid the market is to swap until then to hedge your fuel oil exposure until that long kind of time frames or are you able to do that -- or were you able to do that as well?

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 Unidentified Company Representative,    [25]
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 We locked up the spread swap right now and the impact is going to be until the end of the gas price and the...

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 Mayank Maheshwari,  Morgan Stanley, Research Division - Research Analyst   [26]
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 So this has not fully locked in?

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 Unidentified Company Representative,    [27]
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 No.

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 Unidentified Company Representative,    [28]
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 No.

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 Unidentified Company Representative,    [29]
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 Not yet.

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 Mayank Maheshwari,  Morgan Stanley, Research Division - Research Analyst   [30]
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 Okay. So can you give us just an idea of how much is locked in until then?

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 Unidentified Company Representative,    [31]
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 Hold on 1 second, okay?

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 Mayank Maheshwari,  Morgan Stanley, Research Division - Research Analyst   [32]
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 Sure.

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 Unidentified Company Representative,    [33]
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 All right. Mayank, so right now, what we can do is volume for the second half in 2019 and assessment volume in 2020.

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 Mayank Maheshwari,  Morgan Stanley, Research Division - Research Analyst   [34]
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 Okay. So 20 -- second half 2019 is fully locked in and...

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 Unidentified Company Representative,    [35]
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 Not fully, just assessment volume.

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 Mayank Maheshwari,  Morgan Stanley, Research Division - Research Analyst   [36]
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 Oh, okay. So ma'am, when will we get a lot more clarity on this?

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 Unidentified Company Representative,    [37]
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 What do you think?

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 Unidentified Company Representative,    [38]
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 Clarity on what, Mayank, with the PTT?

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 Mayank Maheshwari,  Morgan Stanley, Research Division - Research Analyst   [39]
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 No. In terms of how you are trying -- no, no. Sort of -- no. When you -- I think, obviously, PTT will have its own views. But like, from PTTEP perspective, when will we get clarity on these entire hedges, et cetera? Because like you used to do on the oil side, you were very clear that you wanted to lock in certain amount of volumes to cover your costs.

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 Unidentified Company Representative,    [40]
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 Yes. I think...

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 Mayank Maheshwari,  Morgan Stanley, Research Division - Research Analyst   [41]
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 So is there a thinking that you have with how you will hedge this kind of portfolio as well on gas now?

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 Unidentified Company Representative,    [42]
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 Yes. I think we have the same policy and same -- kind of thinking the same but on the spreads. We just haven't told you the volume yet, that's all.

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 Mayank Maheshwari,  Morgan Stanley, Research Division - Research Analyst   [43]
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 Okay. But that should eventually come through. Like that disclosure should eventually come through once you are in a position to kind of [stellar] that?

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 Unidentified Company Representative,    [44]
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 That's correct.

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 Mayank Maheshwari,  Morgan Stanley, Research Division - Research Analyst   [45]
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 Okay, okay. And then the last question was on CapEx. So you ended the year with about $1.2 billion of CapEx.

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 Unidentified Company Representative,    [46]
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 Yes.

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 Mayank Maheshwari,  Morgan Stanley, Research Division - Research Analyst   [47]
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 It was much lower than what you had earlier kind of thought about. So how are you kind of thinking for 2019?

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 Unidentified Company Representative,    [48]
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 So we think it's around the same as 2018, Mayank, or -- well, actually, we're going to spend around 80% of the CapEx.

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 Unidentified Company Representative,    [49]
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 Any other questions?

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 Mayank Maheshwari,  Morgan Stanley, Research Division - Research Analyst   [50]
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 There are none, ma'am. Can I just proceed with one more on the...

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 Unidentified Company Representative,    [51]
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 Sure.

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 Unidentified Company Representative,    [52]
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 Sure, Mayank.

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 Mayank Maheshwari,  Morgan Stanley, Research Division - Research Analyst   [53]
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 So finally, on the results side, because I think you had hardly any decline this time in results, how much was organic reserve replacement ratio? And how much was inorganic?

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 Unidentified Company Representative,    [54]
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 Okay. If you look at -- I have the number, only the single year reserve replacement ratio for 2018. It's -- the total is around 1.4 tons. That is only for 2018. But organic is around 1 ton. So we have improved with the replacement in -- on the organic side.

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 Mayank Maheshwari,  Morgan Stanley, Research Division - Research Analyst   [55]
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 Okay. And that is primarily driven in Thailand or also in Thailand, like imported versus domestic?

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 Unidentified Company Representative,    [56]
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 Mostly domestic and MTJDA.

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 Mayank Maheshwari,  Morgan Stanley, Research Division - Research Analyst   [57]
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 Okay. Domestic and -- so like, what has kind of put in on domestic? What has gone up? Roughly, big ones? Any big ones that have moved up?

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 Unidentified Company Representative,    [58]
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 I don't think we disclose it by projects yet, but there will be more details of these reserve movements in -- when we release the audited financial results.

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 Mayank Maheshwari,  Morgan Stanley, Research Division - Research Analyst   [59]
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 Okay, okay. And internationally, is it about 1 year or not yet?

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 Unidentified Company Representative,    [60]
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 I don't think we have the international number on a separate, no. But most -- like I told you, most of the extension and the revision and the improved recovery is from -- in Gulf of Thailand and MTJDA. Is there any other questions or comments?

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 Unidentified Analyst,    [61]
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 Hello. Can you hear me?

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 Unidentified Company Representative,    [62]
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 Yes.

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 Unidentified Analyst,    [63]
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 Yes. I'm just calling (inaudible) in Hong Kong. I have a question on just the HSFO things, right? So first one is if you look at it currently now is that your Dubai party that will be captured HSFO...

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 Unidentified Company Representative,    [64]
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 Sorry. Would you please speak louder?

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 Unidentified Analyst,    [65]
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 Hello. Is this louder now? Hello?

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 Unidentified Company Representative,    [66]
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 Yes. You're talking about the HSFO, right?

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 Unidentified Analyst,    [67]
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 Yes. Especially because your slide number...

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 Unidentified Company Representative,    [68]
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 3?

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 Unidentified Analyst,    [69]
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 #3. Yes, #3. Yes. If you look at this now, HSFO average price now in the fourth quarter is actually at a premium, 1.33% of Dubai. So while in the short run, there's no problem for you to pass on the higher premium that you support in the gas pricing?

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 Unidentified Company Representative,    [70]
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 It -- the gas price will be reflected with this HSFO when the formula is reset every 6 months or 12 months, yes.

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 Unidentified Analyst,    [71]
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 No. I just want to get assurance this will continue to work because this never happened before.

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 Unidentified Company Representative,    [72]
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 Oh, you mean...

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 Unidentified Company Representative,    [73]
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 If it's higher than Dubai?

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 Unidentified Company Representative,    [74]
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 Yes. We also think that this is quite a little bit odd like you mentioned. So we don't think this is going to last long. The reason why it's higher than Dubai, that what we have been told is that because of the sanction of Iran. That's why the HSFO is in a shortage for a little bit, and then the price spiked up. So -- but I -- we don't think it's -- this is, in a long term, going to be like this. And of course, with the IMO coming in.

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 Unidentified Analyst,    [75]
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 So in other words, the buyer, the PTT will still continue to follow the pricing formula. They will not be able to change it even now the HSFO...

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 Unidentified Company Representative,    [76]
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 No. For the existing contract, no.

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 Unidentified Analyst,    [77]
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 Okay. Then also following up on this slide. You said you're going to utilize some hedging contracts to lock in HSFO post 2020. So how do we do that? You're going to buy the gas oil or you're going to sell the -- or buy the Dubai, sell the HSFO? Or how are you going to execute the hedging plan?

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 Unidentified Company Representative,    [78]
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 We entered the agreement linked to the Brent price, yes, and implied it spread to the high sulfur fuel oil. But we refer on the Brent.

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 Unidentified Analyst,    [79]
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 So you're going to buy Brent forward and to sell [things 380]?

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 Unidentified Company Representative,    [80]
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 No. On the other hand, we swapped Brent and we buy high sulfur fuel oil. We long high sulfur fuel oil. That we call a swap spread.

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 Unidentified Analyst,    [81]
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 Okay, okay, okay. Then you've already been doing this already or not yet start to...

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 Unidentified Company Representative,    [82]
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 We have entered some third-hand position for settling in the second half of this year and some to be settled in 2020. Yes.

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 Unidentified Analyst,    [83]
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 What if you have -- you're already done in the second half of last year 2018 or 2019?

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 Unidentified Company Representative,    [84]
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 Of this year, 2019. We done last year in 2018 in order to be settled in the 2019.

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 Unidentified Analyst,    [85]
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 So if you already have confirmation in 2000 -- at the end of the last quarter, you should book some mark-to-market gains.

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 Unidentified Company Representative,    [86]
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 We have some, yes.

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 Unidentified Analyst,    [87]
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 But I think...

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 Unidentified Company Representative,    [88]
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 We have some inside, yes, yes.

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 Unidentified Company Representative,    [89]
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 Yes, they sold out.

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 Unidentified Company Representative,    [90]
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 Yes, very minor.

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 Unidentified Analyst,    [91]
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 Okay, okay, okay. So you're going to fully hedge the exposure? Or are you going to the 50% on the hedging?

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 Unidentified Company Representative,    [92]
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 We just think what we have done for 2019 is already appropriate because the impact for 2019 is just the beginning of the impact. So we don't think the heavy implication yet for 2019 on our gas selling price. But 2020, we are looking forward to do more if required. Yes, it depends on the situation in the market because we have seen a lot of [OPN] on the IMO implication. So we're looking to see the market first, yes.

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 Unidentified Analyst,    [93]
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 Okay, okay. Then for now, going forward, whatever fair value changes in your hedging position will be booked into the...

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 Unidentified Company Representative,    [94]
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 Yes. You're right.

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 Unidentified Company Representative,    [95]
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 Yes, yes. According to the accounting standards.

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 Unidentified Analyst,    [96]
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 Okay. That's fine. Then the second question is about the recent co-investment with [Yangai] at the Dubai-Iraq. So that amount of money investment will be included in this year's CapEx or not?

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 Unidentified Company Representative,    [97]
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 We have -- it's not yet included in the announced CapEx because we just got it last month. But the investment is not that big. It's around USD 230 million for the 3 years -- the first 3 or 4 years and we have only 30% of that. So roughly around less than $100 -- USD 100 million.

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 Unidentified Analyst,    [98]
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 Okay. Over 3 years or the per annum?

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 Unidentified Company Representative,    [99]
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 Over 3 to 4 years, yes, for the exploration period.

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 Unidentified Analyst,    [100]
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 Okay. Will be there be more block or the more concession you're going to get it, to obtain after this one? Or is -- that's all you want, being Abu Dhabi?

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 Unidentified Company Representative,    [101]
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 Our strategy that we look, of course, we look to do more exploration and we look for bidding rounds. Of course, the focus is in Thailand, Southeast Asia. And if we do Middle East, we'll go with the JV, yes. So we'll look for all of that.

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 Unidentified Analyst,    [102]
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 Okay. Then why -- I think last time we met, we're talking about Oman. You're also interested because you are [not get back] to Oman. But I only saw the ENI won the Oman with BP. Didn't see you play a role because there's something else or can you help a bit more?

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 Unidentified Company Representative,    [103]
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 Hold on 1 second. We are still interested in entering the Oman because we used to be the operator in Oman last half a year. And now it's still in our consideration, depends on the bidding round and the opportunity that's going to come in.

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 Unidentified Analyst,    [104]
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 So still looking for opportunities, getting...

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 Unidentified Company Representative,    [105]
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 Yes. We are looking the opportunity into Oman. But the priority right now, as you may be aware of, the coming home strategy that we're focusing in Gulf of Thailand and Myanmar and the Malaysia. And with the exploration activity this year, 2019, we're going to have our -- we'll adopt the exploration drilling. So around 8 wells that we are -- 8 to 9 wells that we're going to do this year. That's the priority, yes.

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 Unidentified Analyst,    [106]
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 Okay, okay. Just one more thing on this -- the ENI year-end target. Do you think it is a gas block or oil block?

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 Unidentified Company Representative,    [107]
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 They both have gas and oil potential.

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 Unidentified Analyst,    [108]
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 Okay. And lastly, just on the Bongkot -- the new concession Bongkot and the NOI's concession. When will the final document will be signed? And then also, the pre-investments, when will start, before the concession starts?

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 Unidentified Company Representative,    [109]
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 We expect to sign the PSC, production sharing contract, by this quarter, the first quarter of 2019. And the pre-investment is quite small because the facilities -- the main facilities are already there. So it's going to be in the range of, let's say, USD 100 million. Maybe very minimal in 2019.

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 Unidentified Company Representative,    [110]
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 Okay. The $100 million investment is for each of the concession or for the 2 concession altogether on 100% base rate?

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 Unidentified Company Representative,    [111]
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 It's quite small. I don't have the exact number. But like we mentioned, we expect the CapEx around $450 million for Bongkot. And Erawan is around USD 600 million. So the pre-investment, I would say, may be very minimal in 2019 and increase a little bit in 2020, '21. But the heavy CapEx that I mentioned will be starting from '22 onwards. But of course, the pre-investment is also a cost recovery.

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 Unidentified Analyst,    [112]
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 Yes. Okay. And then on the -- just a follow-up on the decommission application. So the -- for the Cairo operator, especially the Chevron one, for the Erawan block, were they paying to the cash [through accounting] or they're actually paying the cash into some escrow account? Do we have the access to that decommission? Any cash fundings that they don't pay?

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 Unidentified Company Representative,    [113]
------------------------------
 I don't think the government has concluded the exact vehicle on how the money from the existing concession will be collected yet. But the principle is that we're -- the 3 parties: the current concessionaire, the PSC contractor and the government will determine which facilities to be decommissioned either way at the end of the concession. So that will be the liability of the current concessionaire. And the one that are -- the one that assets that are transferred will be prorated with the ultimate reserve number, prorated by the reserve that they used -- each party used and will use to produce. So that's the principle. But the vehicle of how to collect the actual money, it's not concluded from the government yet.

------------------------------
 Unidentified Company Representative,    [114]
------------------------------
 But the tendency is going to be the bank guarantee rather than transfer the actual money into the fund, yes.

------------------------------
 Unidentified Analyst,    [115]
------------------------------
 Well, for you, you can use a bank guarantee because you will continue to be the operator. But Chevron, basically, they're going to leave Thailand after the Erawan...

------------------------------
 Unidentified Company Representative,    [116]
------------------------------
 Oh, we've don't know yet. We don't know.

------------------------------
 Unidentified Company Representative,    [117]
------------------------------
 But Chevron still operates in Contract 4 and B8. So a few of the blocks that Chevron is still an operator.

------------------------------
 Unidentified Analyst,    [118]
------------------------------
 Okay, okay. Then just one last question. On the Erawan concession, I look at the production that you're declining very fast. Formerly, the current operator doesn't really have the interest to maintain production level for the sake of the continuation. Will you take over? Will be -- any measures will be taken to look into this?

------------------------------
 Unidentified Company Representative,    [119]
------------------------------
 Yes. Sure, of course. So after we signed the PSC with the government and we are -- we're going to go with the DMF to discuss with Chevron how we're going to maintain the level of the production and see what we're going to do after that. So there is a mechanism after we sign the PSC.

------------------------------
 Unidentified Analyst,    [120]
------------------------------
 The mechanism will just allow you to take that investment or -- okay.

------------------------------
 Unidentified Company Representative,    [121]
------------------------------
 Yes. There is also, they call, commercial agreements where if you invest and the production comes after the concession ends, then we can actually negotiate and agree on how much proportion the investment, who should put the money in what proportion. So that would be agreed in the commercial agreement.

------------------------------
 Unidentified Company Representative,    [122]
------------------------------
 So the possibility could be we won't be allowed to enter into the area and do some of the construction or maybe drilling or either Chevron's going to do it for us. So there is various options on that. But after the PSC is signed is that what we're going to discuss with the government, together with the Chevron, and agree the way forward together.

------------------------------
 Unidentified Analyst,    [123]
------------------------------
 Okay, okay, okay. Yes. Actually, I have one last question. Just on the new construction regime, right? What happens if the investment is a bit too little? So there's unused [cost gas]. What will happen to those unused amount of cost gas ?

------------------------------
 Unidentified Company Representative,    [124]
------------------------------
 You mean cost recovery?

------------------------------
 Unidentified Analyst,    [125]
------------------------------
 Yes, because the new mechanisms that the regime under the...

------------------------------
 Unidentified Company Representative,    [126]
------------------------------
 PSC?

------------------------------
 Unidentified Analyst,    [127]
------------------------------
 On your concession, right? Because you have the 50% -- yes, the PSC. You had a 50% of cost recovery, right? Applying the (inaudible) unused cost gas, will that cost gas will be redistribute or you'll be able to retain it?

------------------------------
 Unidentified Company Representative,    [128]
------------------------------
 Oh, if it's more than the cap of 50%.

------------------------------
 Unidentified Analyst,    [129]
------------------------------
 Yes, yes. Because...

------------------------------
 Unidentified Company Representative,    [130]
------------------------------
 Okay. It will be rolled over to the following year.

------------------------------
 Unidentified Analyst,    [131]
------------------------------
 And if you will be retaining 100%, it'll redistribute on a different ratio between you and the government, right?

------------------------------
 Unidentified Company Representative,    [132]
------------------------------
 Yes, we believe so.

------------------------------
 Unidentified Analyst,    [133]
------------------------------
 So there will be no redistribution under different ratios between PTTEP and the government, is there?

------------------------------
 Unidentified Company Representative,    [134]
------------------------------
 You mean (inaudible).

------------------------------
 Unidentified Analyst,    [135]
------------------------------
 No. Okay, let me rephrase this one.

------------------------------
 Unidentified Company Representative,    [136]
------------------------------
 Okay.

------------------------------
 Unidentified Analyst,    [137]
------------------------------
 For example, towards now, there is a cap of cost recovery of 50%, right? So if you actually spent a bit more properly on that particular year, you won't be able to cover -- recover 100% of your spend. Then you're going to have leftover gas, right? So the remaining cost gases, which not yet been recovered, is that amount you'll be able to hold 100% to it, and then you can use for the following year?

------------------------------
 Unidentified Company Representative,    [138]
------------------------------
 Yes, correct.

------------------------------
 Unidentified Analyst,    [139]
------------------------------
 Or is actually that unused cost gas will be redistributed? So you actually will be not allowed to use 100%. You will be only allowed to use -- recover less than 100% in the following year. So which scenarios?

------------------------------
 Unidentified Company Representative,    [140]
------------------------------
 We'll be able to be allowed to use...

------------------------------
 Unidentified Analyst,    [141]
------------------------------
 100%?

------------------------------
 Unidentified Company Representative,    [142]
------------------------------
 The leftover from last year in the following year. The 50% is just only the cap for each year and you can carry over the unrecoverable cost to the following year. Is that the rationale under the PSC?

------------------------------
 Unidentified Analyst,    [143]
------------------------------
 Okay. So can carry for 8 years?

------------------------------
 Unidentified Company Representative,    [144]
------------------------------
 Carry for...

------------------------------
 Unidentified Company Representative,    [145]
------------------------------
 Unutilized.

------------------------------
 Unidentified Company Representative,    [146]
------------------------------
 To the end of the contract, yes.

------------------------------
 Unidentified Company Representative,    [147]
------------------------------
 End of PSC.

------------------------------
 Unidentified Company Representative,    [148]
------------------------------
 Any other questions on the results or anything about PTTEP?

------------------------------
 Unidentified Company Representative,    [149]
------------------------------
 Happy with the dividend?

------------------------------
 Unidentified Company Representative,    [150]
------------------------------
 Okay. I think that concludes our conference call. Thank you very much. If you have any other questions, you know where to contact us, okay? Have a good day. Bye-bye.

------------------------------
 Unidentified Company Representative,    [151]
------------------------------
 Bye.




------------------------------
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