TRIS Rating Co., Ltd. said today that the ratings of PTT Exploration and Production PLC (PTTEP) would not be impacted following the company?s announcement to acquire Hess Corporation?s (Hess) interest in Indonesian oil & gas producing assets.
PTTEP announced on 2 December 2013 that the company will join with PT Pertamina on a 50:50 basis, to acquire a 75% interest in the Pangkah project and a 23% interest in the Natuna Sea A project in offshore of Indonesia from Hess. The transaction value is estimated at US$1,300 million, of which approximately US$650 million is PTTEP?s portion. The acquisition is expected to be completed by the first quarter of 2014. However, the completion of the transaction is subject to customary closing conditions, as specify in the share purchase agreements (SPAs).
The Pangkah project currently produces approximately 7,000 barrel per day of oil and 33 million cubic feet per day (mmscfd) of gas, and holds total proved and probable reserves (2P) of 110 million barrel of oil equivalent (mmboe). The Natuna Sea A project produces approximately 2,350 barrel per day of oil and 220 mmscfd of gas, with proved and probable reserves of 209 mmboe.
TRIS Rating views that the acquisition is in line with PTTEP?s strategy to double its production output from approximately 300,000 barrel of oil equivalent per day (boed) currently, to 600,000 boed within 2020. TRIS Rating estimated that after the transaction, PTTEP?s total production will increase by 4%-5% in 2014. In addition, these two projects will raise PTTEP?s proved and probable reserves by approximately 65 mmboe. As of December 2012, the company had proved petroleum reserves of 901 mmboe.
TRIS Rating noted that, the transaction will have minimal effects on the company?s capital structure and the debt to capitalization should remain in line with TRIS Rating?s base-case scenario. PTTEP?s will fund this transaction with its available cash on hand (US$2,590 million, as of September 2013). Both projects are in the production phase and are expected to generate immediate cash contributions to PTTEP. Based on PTTEP?s current average sale price and EBITDA (earnings before interest, tax, depreciation, and amortization) margin, the acquired assets will generate approximately US$250 million of EBITDA per year for PTTEP. For the first nine months of 2013, PTTEP reported approximately US$4,000 million of EBITDA.
PTTEP is the leading petroleum exploration and production company in Thailand. As of August 2013, PTT PLC (PTT), the national oil and gas company, held a 65.3% stake in PTTEP.
TRIS Rating currently rates PTTEP?s company and senior debenture ratings at ?AAA? and subordinated capital debentures at ?AA? with ?stable? outlook.
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