TRIS Rating Co., Ltd. has assigned the company rating to The Bangchak Petroleum PLC (BCP) at “BBB+” with “stable” outlook. The rating reflects BCP’s satisfactory refinery operations, strengthened balance sheet, and greater integration and support from PTT PLC (PTT). The fluctuations in oil prices and gross refining margins, as well as declining demand for refined petroleum products are rating concerns.
The “stable” outlook reflects the expectation that the new hydrocracking unit of BCP will be completed by the end of 2008. The new cracking unit is expected to alleviate the existing refinery limitations and yield more high-value refined products. Better refining margins from the new cracking unit should help BCP weather the down cycles of the refining business.
TRIS Rating reported that BCP was established in 1985 and listed on the Stock Exchange of Thailand (SET) in 1993. The company owns and operates an oil refinery located in Bangkok with a capacity of 120 thousand barrels per day. The company also operates approximately 1,000 service stations under the “Bangchak” brand. After a capital increase in May 2006, PTT became the major shareholder of BCP. As of June 2008, PTT held 29.7% of BCP and the Ministry of Finance (MOF) held 11.2%, with the remaining 59.1% held by the public. As a simple refinery, BCP produces a higher portion of fuel oil, which is a lower-value product, than a complex refinery. The average product mix during 2007-2008 was diesel (36%), fuel oil (37%), gasoline (14%) and other refined products (13%).
TRIS Rating said, during 2006-2008, BCP’s operating performance has continuously improved. The refinery utilization rate increased from 48% in 2006 to 60% for the first half of 2008 as the company has been able to export premium-grade fuel oil to China and Japan. Due to the increased portion of cheaper domestic crude and the higher selling price obtained from premium-grade fuel oil, BCP’s total gross refining margin reached US$13.00 per barrel for the first half of 2008. However, its marketing performance has continued to decline, reflecting an industry-wide slide, BCP recorded a negative marketing margin of Bt0.08 per liter (Bt-0.08) for the first half of 2008. With the refining and marketing combined, BCP’s total earnings before interest, tax, depreciation and amortization (EBITDA) improved to Bt4,324 million for the first half of 2008. BCP’s capital structure remained healthy, with a debt to capitalization ratio of 36.7% as of June 2008. Due to plans for investments during 2008-2010, leverage is expected to increase slightly to 40%-45%.
Global financial turmoil has resulted in declining demand for refined petroleum products while future refining capacity in the Asia-Pacific region during 2008-2010 may lead to a regional over-supply situation, said TRIS Rating. -- End
Company Rating: BBB+ Rating Outlook: Stable
Copyright 2008, TRIS Rating Co., Ltd. All rights reserved. Any unauthorized use, disclosure, copying, republication, further transmission, dissemination, redistribution or storing for subsequent use for any purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person, of the credit rating reports or information is prohibited. The credit rating is not a statement of fact or a recommendation to buy, sell or hold any debt instruments. It is an expression of opinion regarding credit risks for that instrument or particular company. The opinion expressed in the credit rating does not represent investment or other advice and should therefore not be construed as such. Any rating and information contained in any report written or published by TRIS Rating has been prepared without taking into account any recipient’s particular financial needs, circumstances, knowledge and objectives. Therefore, a recipient should assess the appropriateness of such information before making an investment decision based on this information. Information used for the rating has been obtained by TRIS Rating from the company and other sources believed to be reliable. Therefore, TRIS Rating does not guarantee the accuracy, adequacy, or completeness of any such information and will accept no liability for any loss or damage arising from any inaccuracy, inadequacy or incompleteness. Also, TRIS Rating is not responsible for any errors or omissions, the result obtained from, or any actions taken in reliance upon such information.