TRIS Rating Co., Ltd. has assigned the rating of “AA” to the proposed issue of up to Bt5,000 million in subordinated capital debentures of PTT Exploration and Production PLC (PTTEP). At the same time, TRIS Rating has affirmed the company rating of PTTEP and the ratings of PTTEP’s senior debentures at “AAA” with “stable” outlook.
TRIS Rating states that the issue rating of PTTEP’s subordinated capital debentures is two notches below corporate credit rating of PTTEP, reflecting the deferability and subordinated nature of the debentures. The payment obligation on the proposed debentures ranks behind claims of senior debenture holders and other ordinary creditors. The proposed debentures contain interest deferral provisions that enable PTTEP to defer interest payment any time. Any deferred interest is cumulative but will not be subject to interest charge.
TRIS Rating said, the “AAA” ratings of PTTEP and its senior debentures continue to reflect the company’s leading position in the petroleum exploration and production (E&P) industry in Thailand, solid asset base, the support received as the E&P arm of the Thai government, and healthy financial profile. The ratings also take into consideration the execution risk connected with its overseas operations. The “stable” outlook reflects TRIS Rating’s expectation that PTTEP will maintain its healthy financial position despite the large capital expenditures planned for 2012-2016. With the company’s disciplined and conservative financial policy, PTTEP is expected to pursue its growth strategy without weakening its financial strengths.
TRIS Rating reported that PTTEP is the leading petroleum E&P company in Thailand. It was established in 1985 to hold petroleum concession rights on behalf of the Thai government. As of February 2012, PTT PLC (PTT), the national oil and gas company, held a 65.3% stake in PTTEP. PTT and PTTEP remain state enterprises as defined by Thai law. As the E&P arm of PTT and the Thai government, PTTEP has leveraged its position to participate in petroleum projects with high potential, both in Thailand and abroad.
TRIS Rating said, as of December 2011, total proven petroleum reserves owned by PTTEP, including reserves from overseas projects, were 969 million barrels of oil equivalent (mmboe), a 7.1% decrease from 2010. Reserves from overseas projects constituted 44% of total proven reserves in 2011, a slight rise from 41% in 2010. Given the sales volume of 265,047 barrels of oil equivalent per day (boed) for 2011, the reserves should last about nine years, which is slightly lower than the 10-15 years of reserves typically held by world-class E&P companies. As of May 2012, the company had 40 projects on hand, 20 of which were in the production phase, with the remainder in the exploration and development phases.
PTTEP’s operating efficiency remains competitive, though costs have increased, compared with international E&P peers. PTTEP’s lifting cost increased to US$3.86 per barrel of oil equivalent (boe) in the first quarter of 2012 from US$3.65 per boe in the same period of 2011, due mainly to the high lifting costs incurred in new production projects.
The overall financial position of PTTEP remains strong. In the first quarter of 2012, PTTEP’s total sales increased by 27% to US$1,525 million. The rise was mainly due to a 31% year-on-year (y-o-y) increase in its average selling price to US$64.79 per boe, while the sales volume dropped by 7% y-o-y to 253,411 boed. The drop was mainly due to the cessation of operations at the Arthit North project in November 2011 and decreasing natural gas volume of the Arthit project as adjusted in the new contract. The operating margin before depreciation and amortization slightly improved, rising to 71.9% in the first quarter of 2012, from 71.0% in the first quarter of 2011. The earnings before interest, tax, depreciation, and amortization (EBITDA) interest coverage ratio decreased to 36.6 times in the first quarter of 2012 from 37.6 times in the same period of 2011. The company’s liquidity remained very healthy, as cash on hand totaled US$1,763 million. PTTEP also had unused credit facilities of approximately US$610 million as of March 2012.
PTTEP’s five-year expenditure plan for its existing projects during 2012 to 2016 is worth US$19,624 million. Approximately 54% of total capital expenditures is for investments in Thailand, while the rest will be spent on projects in Southeast Asia (22%), North America (15%), Australasia (5%), and other locations (4%). The expenditures aim to increase PTTEP’s sales volume by 25%, from 265,047 boed in 2011 to an average of 330,000 boed during 2013-2016. PTTEP’s operating cash flows of approximately US$3,000-US$4,000 million per year, plus its cash on hand, will be sufficient to finance its existing projects, said TRIS Rating. — End
Company Rating: Affirmed at AAA Issue Ratings: PTTEP125A: Bt18,300 million senior debentures due 2012 Affirmed at AAA PTEP126A: Bt3,500 million senior debentures due 2012 Affirmed at AAA PTTEP135A: Bt5,000 million senior debentures due 2013 Affirmed at AAA PTTEP145A: Bt11,700 million senior debentures due 2014 Affirmed at AAA PTEP183A: Bt2,500 million senior debentures due 2018 Affirmed at AAA PTTEP195A: Bt5,000 million senior debentures due 2019 Affirmed at AAA PTEP226A: Bt3,000 million senior debentures due 2022 Affirmed at AAA Up to Bt5,000 million subordinated capital debentures AA Rating Outlook: Stable
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