Krungsri Securities (KSS) viewed that Thai Oil has a high chance of winning in the legal dispute, as evidence clearly indicates that the main contractor (UJV) was at fault for not paying the sub-contractors, even though Thai Oil had already paid the main contractor.
The comment came after Thai Oil Public Company Limited (SET: TOP) has announced arbitration proceedings initiated against the company by Samsung E&A (Thailand) and Saipem Singapore over the Clean Fuel Project’s EPC contract. Specifically, the claimants allege that Thai Oil’s enforcement of approximately $358 million in security was premature and improper, leading to unspecified damages. Thai Oil maintains its actions complied with the contract and has filed counterclaims, asserting that the arbitration will not impede the project’s progress and that they are prepared to defend their position.
KSS stated that the regional bank’s decision to pay the guarantee highlights that the bank has deemed Thai Oil entitled to the funds.
Regarding the guarantee seizure, Thai Oil has recognized the $358 million guarantee, which remains unchanged from previous figures. In the first quarter of this year, $98 million will be recognized through the profit and loss statement, with the remainder to be capitalized to reduce the construction costs of the CFP project.
The ongoing and future legal proceedings are unlikely to cause market upheaval, as the CFP project has already been significantly affected by additional costs and construction delays. There is a strong likelihood that Thai Oil will have to defend its legal rights.
If Thai Oil wins the dispute in the long term, it would present upside to the estimates. It is expected that Thai Oil has plans in place should they need to change the main contractor, given that they requested additional investment funds, amounting to 33% of the original project value. The legal processes will take time, and the details have not been disclosed, hence the upside from compensation and additional guarantee seizures are not yet included.
Additionally, KSS added that the recommendation of “Buy” is maintained with a target price of 33 baht per share, projecting continuous profit growth in 2025 when stock losses reduce and the SBM2 comes into operation. This year sees reduced maintenance shutdowns. The final perspective is that Thai Oil will be able to secure a main contractor to proceed with the construction as planned and will have upside potential if they obtain the necessary legal guarantees.
As of March 26, 2025, Thai Oil’s stock price closed at 25.25 baht, down by 1.50 baht or 5.61%, with a trading value of 920.30 million baht.
