Bangkok--27 Jun--Fitch Ratings
PTT Exploration and Production Public Company Limited's (PTTEP; BBB+/Stable) recent acquisition of Partex Holdings B.V. and the final investment decision on its Mozambique liquefied natural gas (LNG) project will boost the company's reserves and production, Fitch Ratings says. We expect Thailand-based PTTEP to continue investing in and acquiring oil and gas assets to boost its operating profile.
PTTEP is likely to spend about USD1.7 billion on the Mozambique Area 1 LNG project until its completion in 2024 and we expect the company to spend about USD622 million on acquiring 100% of Partex in 2019. The company also expects to spend USD2.2 billion on purchasing Murphy Oil Corporation's Malaysian assets this year.
The company's standalone credit profile of 'bbb' takes into account its relatively weak but improving reserves and reserve life compared with most 'BBB' category peers. PTTEP had about 677 million barrels of oil equivalent (mmboe) of proved (1P) reserves at end-December 2018, compared with over 1,000mmboe for most other 'BBB' category peers. We estimate PTTEP has reserves of around 900 mmboe including the Mozambique project and the Murphy and Partex acquisitions; the company expects the Mozambique LNG project to improve 1P reserves by about 140mmboe.
PTTEP effectively owns an 8.5% working interest in the Mozambique project. The final investment decision on the project was announced on 18 June 2019 with LNG capacity of 12.88 million tonnes per annum in the first phase. The project is likely to be one of the largest LNG projects in the world, with over 75 trillion cubic feet of gas reserves and the company expects delivery of its first cargo by 2024. The completion of the project would also help improve PTTEP's geographical and earnings diversity as the company currently has little exposure to earnings from LNG.
PTTEP also signed a share purchase agreement this month to acquire the 100% stake in Partex and expects the acquisition to be completed by 2019. Partex will add about 65 mmboe of proved and probable (2P) reserves (PTTEP has over 1,000mmboe of 2P) and has production of about 16,000 barrels of oil equivalent per day (boepd) compared with PTTEP's 359,000 boepd in 2018. Partex mostly holds non-operating stakes in oil producers in the Middle East.
PTTEP's rating is equalised with that of its parent, PTT Public Company Limited (PTT; BBB+/Stable), reflecting our assessment of the strong operating and strategic linkages between the two companies. PTTEP's standalone credit profile of 'bbb' is based on its reasonable production size, low but improving reserves and strong financial profile. Fitch expects PTTEP to invest around USD15 billion over the next five years, which captures the expected spending on the Mozambique project and Partex. We expect the company to maintain net leverage at around zero over the medium term after reporting net cash at end-2018. Fitch also believes PTTEP's strong financial profile will provide adequate headroom to make large investments.