PTT PCL [SET:PTT] is Thailand’s largest fully integrated gas and oil company and the seventh largest energy company in the Asia/Pacific rim region, according to Platts. The company, which is two-thirds owned by Thailand’s government, operates three business sectors including upstream petroleum and natural gas, downstream petroleum, and coal. It procures, transmits and distributes natural gas through subsea natural gas pipelines in the Gulf of Thailand and a network of liquefied petroleum gas (LPG) terminals.

PTT is also involved in electricity generation, petrochemical products, oil and gas exploration and production, and petrol retailing businesses through its affiliated companies, including PTT Exploration and Production, PTT Utility Co. Ltd., PTT Global Chemical, PTT Retail Management Co, PTT Asia Pacific Mining and PTT Green Energy.

PTT is traded on the Thailand SET and is the top held stock, out of the 32 stocks listed in the MSCI Thailand index, with a 10.44% weighting. Foreign institutional investors are required to hold PTT shares if their funds are MSCI designated.

Here are some fundamentals to be considered. PTT reported Q3 2014 net profits of THB 24.56 billion, compared to Q3 2013 net profits of THB 30.8 billion, or down 20.3% from a year ago. Q3 2014 total revenues were THB 757.62 billion, compared to Q3 2013 total revenues of THB 723.08 billion, up 4.8% from a year ago.

This week, the company warned that its 2014 net profit could be lower than the THB 94.65 billion earned in 2013, due to sharply lower oil prices. Its subsidiary, PTT Exploration and Production PCL [SET:PTTEP], currently contributes about 60% of the company's operating profit.

PTT is up 5.94% year-to-date and –3.81% for its 3-year return. The stock is traded at a P/E ratio (TTM) of 8.8, the price to book (P/B) ratio of 1.20 and the price to cash flow (P/CF) ratio of 4.99. The company with a low P/B ratio and high cash flow or low P/CF ratio is considered as “value”. PTT pays a 2.3% dividend with 5-year dividend growth of 17.26%.

PTT is in the process of business restructuring, which includes moving away from the volatile and low-margin refinery sector to the higher value-added petrochemical products. The company has hired Goldman Sachs and Phatra Securities for the sale of its 27.22% stake in oil refiner Bangchak Petroleum PCL, while its 36% holding in Star Petroleum Refining Co will be diluted via a public offering.

According to Hong Kong-based FinanceAsia, PTT has also hired Bualuang Securities, Bangkok Bank and Morgan Stanley to study options that could include spinning off its retail business, PTT Retail Management Co, which operates over 1200 petrol and other retail businesses nationwide.

In an interview with Bloomberg this month, PTT’s chief financial officer Mr. Wirat Uanarumit said that the company is on the lookout for acquisitions of medium- to small-sized distressed energy companies in the U.S. as slumping oil prices make it more difficult for companies to find funding. It is easier said than done though.

According to a Deutsche Bank analyst, about a third of the U.S. companies in energy related sectors with a “B” or a “CCC” credit rating may be pushed to a default if the crude oil prices drop to U.S. $55 a barrel. Financially distressed companies may ask for an extremely high acquisition premium in order to gain shareholder and board approval due to the value of the underlying assets.

In addition, a “white knight”, such as Continental Resources Inc. [NYSE:CLR] which already operates at North Dakota’s Bakken Shale, or U.S. hedge funds and private equity firms could make such a deal more difficult and costly.

Moreover, U.S. oil exports have been banned for 40 years and still are. Unless PTT is also planning to start up a refinery in the U.S. to turn crude oil into a lightly refined product known as oil condensate, they won’t be able to ship crude oil back to Thailand.

Finally, PTT may want to learn lessons from the Cnooc Unocal saga. In 2005, Cnooc, the Chinese National Offshore Oil Corp, failed in their attempt to acquire U.S. Unocal Corp. for $18.5 billion, as the U.S. Congress blocked the deal. Chinese firms have since learned the hard reality and changed their strategies by taking minority stakes instead.

We will be on the sidelines for now. According to Wolfe Research LLC, the crude oil prices may fall to $50 a barrel by early next year. As long as the crude oil prices stay low, things will be harder to execute in the real world than in the boardroom.

Disclosure: No position in PTT