TRIS Rating has viewed that the credit ratings of PTT Exploration and Production PLC (PTTEP) are not affected by the US$986 million loss for its financial results for the first nine months of 2015 due to the impairment of assets caused by lower oil price environment.
During the third quarter of 2015, PTTEP reported an impairment of US$1.4 billion for its liquid-based assets mainly in the Marina Oil Sands project and Montara project as a result of a downward revision of oil price assumption to US$50-US$60 per barrel during 2016-2018. The impairment has no impact on the company’s operating cash flow. However, the reduction in oil price assumption is expected to lower the company’s earnings before interest, tax, depreciation, and amortization (EBITDA) by 10%-15% to about US$3 billion per year during 2016-2018. TRIS Rating believes that PTTEP has sufficient flexibility to lower its capital expenditure (CAPEX) and manage cash cost in response to lower oil price and expected reduced EBITDA. For the first nine months of 2015, PTTEP was able to lower its cash cost from US$21 per barrel to US$17 per barrel and cut its CAPEX for 2015 from an initial budget of US$3.1 billion to approximately US$2.2 billion. PTTEP’s CAPEX is expected to be rationalized to maintain its current production profile under the low oil price environment. The company has a very strong liquidity. At the end of September 2015, the company had cash on hand and cash equivalents of US$3.1 billion, versus total debt of US$3.3 billion. The company plans to prepay approximately US$400 million in debts in 2015, on top of scheduled debt repayment of US$750 million for the year. PTTEP has no debt due in 2016.
TRIS Rating currently assigns PTTEP’s company and senior unsecured debenture ratings of "AAA" and assigns the rating of "AA" to PTTEP’s subordinated capital debentures, with "stable" outlook.
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