TRIS Rating Co., Ltd. has assigned the rating of “AAA” to the proposed issue of up to Bt40,000 million in senior debentures of PTT Exploration and Production PLC (PTTEP). At the same time, TRIS Rating has affirmed the company rating and the ratings of PTTEP’s existing senior debentures at “AAA”. The rating outlook remains “stable”. The ratings continue to reflect PTTEP’s leading position in the petroleum exploration and production (E&P) industry in Thailand, its solid asset base, and the support received as the E&P arm of the Thai government. The ratings also take into consideration the company’s very strong financial profile and healthy cash flow, despite falling petroleum price and large capital expenditures planned for 2009-2010.
The “stable” outlook reflects TRIS Rating’s expectation that PTTEP will be able to maintain its healthy financial position despite the weakening gas market environment. The current decline in gas demand due to the slowing economy is partly mitigated by the long-term gas sales agreements with PTT. The company’s financial policy is expected to remain conservative to accommodate higher operating and commodity price risks.
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 2009, PTT PLC (PTT), the national oil and gas company, held a 65.5% stake in PTTEP. PTT and PTTEP remain state enterprises as defined by the Thai law. As the E&P arm of PTT and the Thai government, PTTEP has leveraged its position to participate in high potential petroleum projects in Thailand and abroad.
As of December 2008, total proven petroleum reserves owned by PTTEP, including reserves from overseas projects, were 944 million barrels of oil equivalent (mmboe). Given the sales volume of 219,314 barrels of oil equivalent per day (boed) for 2008, the reserves should last about 10 years, which is comparable to average reserves at world-class E&P companies of 10 to 15 years. As of December 2008, the company had 42 projects on hand, 15 of which were in the production phase, with the remainder in the exploration and development phases. PTTEP’s operating efficiency is competitive compared with international E&P peers. Its lifting cost increased from US$1.82 per barrel of oil equivalent (boe) in 2005 to US$2.46 per boe in 2008, due mainly to higher cost in new production projects. The three-year average finding and development (F&D) cost ending 2008 significantly increased to US$15.67 per boe, but is expected to decrease in 2009 once the reserves from the M-9 project are included.
PTTEP’s financial position remains very strong. In 2008, sales increased by 46.1%, to Bt132,621 million, and net profit increased by 46.5%, to Bt41,675 million. At the end of December 2008, the debt- to-capitalization ratio was very healthy at 13.8%. The earnings before interest, tax, depreciation and amortization (EBITDA) interest coverage ratio was 126.6 times in 2008. Operating margins before depreciation and amortization were relatively high, averaging 71%-74% over the last three years. The company’s planned expenditures of Bt485,166 million for 2009-2013 are relatively higher than the previous plan mainly because of the upward revision of 2009 capital expenditures from the inclusion of Coogee Resources Ltd. in Australia. Capital spending of Bt108,172 million in 2009 and Bt65,391 million in 2010 will be funded through the company’s projected operating cash flow of Bt40,000-Bt50,000 million per year and borrowings. Additional debts of Bt30,000-Bt40,000 million per year would not weaken the balance sheet, which is currently solid. In addition, the company has high liquidity, with a combined balance of cash and short-term investments of Bt43,995 million as of December 2008, said TRIS Rating. -- End
Company Rating: Affirmed at AAA Issue Ratings: PTEP102A: Bt3,500 million senior debentures due 2010 Affirmed at AAA PTEP106A: Bt6,000 million senior debentures due 2010 Affirmed at AAA PTEP126A: Bt3,500 million senior debentures due 2012 Affirmed at AAA PTEP183A: Bt2,500 million senior debentures due 2018 Affirmed at AAA PTEP226A: Bt3,000 million senior debentures due 2022 Affirmed at AAA Up to Bt40,000 million senior debentures due within 2024 AAA Rating Outlook: Stable
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