Bangkok--28 Mar--Moody's
Moody's Investors Service has today assigned a Baa1 rating with a stable outlook to the senior unsecured 10-year fixed-rate notes to be issued by PTTEP Canada International Finance Ltd, an indirect wholly-owned subsidiary of PTT Exploration and Production Public Company Limited ('PTTEP', Baa1 stable).
The proposed notes will be irrevocably and unconditionally guaranteed by PTTEP. The proceeds will be used primarily for general corporate purposes.
RATINGS RATIONALE
The Baa1 rating combines PTTEP's stand-alone rating of Baa2 with a one-notch uplift reflecting Moody's assessment of the credit support that its 65.32% parent, PTT Public Company Limited ('PTT', Baa1 stable), is likely to provide in the event of distress.
The stand-alone Baa2 rating incorporates the stability afforded by the long-term gas sale contracts, providing cash flow visibility. Countering these strengths are PTTEP's rising leverage to support its high medium-term development capex and growing appetite for acquisitions. Its acquisition of the Kai Kos Dehseh Oil Sands project ('KKD project') in Canada, completed in January 2011, has elevated its development and financial risks.
The one notch uplift to final Baa1 rating reflects PTTEP's strategic importance within PTT's energy value chain and their close business integration.
PTTEP's stable ratings outlook reflects the expectation that the company will pursue its growth plans in a financially prudent manner. It is also in line with the stable outlook of PTT.
Near-term upward rating pressure is limited given the substantial development risk that PTTEP faces. Positive rating momentum could emerge if PTTEP reduces its debt leverage because of organic growth, asset divestment, or equity issuance.
An upgrade of PTT may trigger a review of the rating uplift provided to PTTEP.
Downward rating pressure would emerge if PTTEP further engages in debt-funded acquisitions that raise its development risk. Cost overruns or delays in project development would also be negative for the rating.
PTTEP's rating will be downgraded if its parent, PTT, is downgraded.
The last rating action on PTTEP was on February 21, 2011 when Moody's downgraded the company's issuer and senior unsecured ratings to Baa1 from A3 with a stable outlook.
The principal methodology used in rating PTTEP was Moody's "Global Independent Exploration and Production (E&P) Industry," published in December 2008.
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 65.32% ownership.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.
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Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.
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