Bangkok--25 Nov--Moody's Investors
Moody's Investors Service has today placed on review for possible downgrade the A3 issuer and senior unsecured bond ratings of PTT Exploration and Production Public Company Limited('PTTEP') and its parent, PTT Public Company Limited ('PTT').
"This rating action follows PTTEP's announcement of its acquisition of a 40% interest in the Kai Kos Dehseh Oil Sands Project in Canada from Statoil ASA (Aa2, stable) at a price of US$2.28 billion," says Renee Lam, a Moody's Vice President and Senior Analyst.
"As a result, the company's debt leverage would rise substantially, and is expected to remain weak compared to other similarly-rated upstream exploration and production companies rated at similar rating level."
PTTEP plans to incur an additional US$1.2 billion in debt to partly fund the transaction, which represents more than a 50% increase from its reported debt of THB71.1 billion (approximately US$2.1 billion) on Sep 30, 2010. Moody's estimates PTTEP's debt to proved developed reserves to stay at above US$7/boe in 2011-2012, which is significantly higher than its historical levels.
Meaningful leverage reduction could be challenging over the next 2 years, given the ramp-up stage of the project, as well as potentially further acquisitions by PTTEP to meet its production target of 900,000 bpd by 2020.
"The Australian authorities' review of PTTEP's operating license in the country, as a result of the Montara oil spill, also poses a degree of uncertainty to the company's business in this key market, in which PTTEP has made considerable investments," says Lam.
"The review of PTT was prompted by the review initiated on PTTEP," says Lam.
"In Moody's view, PTT's credit profile is substantially driven by PTTEP, given the latter's significant contribution to its parent's earnings, at 59% of EBITDA in 2009," says Lam.
The review on PTTEP will focus on its 1) capex plans for 2011-2012; 2) acquisition appetite over the next 1-2 years; and 3) medium-term funding plans to support its further growth. The review will also consider the regulatory review on PTTEP's operating license in Australia
The review on PTT will focus on the its 1) latest medium-term growth plans, including any further international acquisitions; and 2) consolidated profile in the next 2 years, taking into account both its own capex and PTTEP's investment plans, as well as the funding strategies of both companies.
The last rating actions on both PTTEP and PTT were taken on October 28, 2010 when Moody's changed both companies' ratings outlook to stable from negative, following Moody's outlook change on Thailand's sovereign rating.
The principal methodology used in rating PTTEP was Moody's "Global Independent Exploration and Production (E&P) Industry," published in December 2008.
The principal methodology used in rating PTT was Moody's "Global Integrated Oil & Gas Industry" published in November 2009.
PTTEP is engaged in the exploration and production of crude oil, condensate and natural gas. Established by the Petroleum Authority of Thailand (now PTT) in 1985 as part of a national energy strategy, it is now a listed company with PTT retaining 65.35% ownership.
PTT is a fully integrated oil, gas and petrochemicals company in Thailand and is 51.36% directly owned by Thailand's Ministry of Finance with a further 15.33% held by Vayupak Mutual (government-invested funds).
Hong Kong
Renee Lam
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service Hong Kong Ltd.
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
Hong Kong
Gary Lau
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service Hong Kong Ltd.
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)