Bangkok--Dec 16--Fitch Ratings
Fitch Ratings (Thailand) Limited today affirmed the ‘F1(tha)’ National Short-term rating of Esso (Thailand) Plc’s THB8.0 billion bills of exchange (“B/E”) revolving programme.
The rating reflects the standby credit facility provided by Exxon Overseas Investment Corporation (“EOIC”), ExxonMobil’s wholly-owned subsidiary, that is set to fully cover the up to three-month B/E issued under the programme. Esso (Thailand) undertakes to ensure that the standby credit facility will be available to satisfy the company’s obligations under the B/E programme as well as all outstanding short-term obligations.
The rating is also supported by strong operational and financial supports from ExxonMobil (rated ‘AAA’/Stable/‘F1+’), the world’s largest publicly-traded integrated oil and gas company. Esso (Thailand) is one of ExxonMobil’s key refining, oil marketing and chemical production businesses in Asia, with a total investment of nearly USD1.0 billion. It is also able to leverage on its parent’s worldwide procurement network for crude oil and refined products, while enjoying the benefits of a cost-efficient refinery and strong brand name in Thailand. Esso (Thailand) is 87.5%-owned by ExxonMobil Group, with the rest owned by the Thai Ministry of Finance (“MoF”).
Over the past three years, Esso (Thailand) has benefited from high global oil prices, strong regional oil demand, as well as a tightening gap of domestic excess capacity, resulting in an improvement in its gross refining margin (“GRM”). The domestic industry average GRM improved from USD1.7/barrel for 2002 to USD2.9/barrel for 2003 and USD5.3/barrel for 2004, while remaining strong in 2005. Despite its 30-day plant turnaround, Esso (Thailand) still recorded a consecutive year of solid earnings performance in 2004, with EBITDAR of THB11.3bn (2003: THB11.1bn).
Fitch’s key rating concerns include Esso (Thailand)’s continued weak stand-alone financial position, the cyclical nature of the oil business as well as competitive pressure in the oil marketing business. At end-2004, its total debt increased to THB67.7bn (at end-2003: THB64.4bn), largely due to the amount of accrued interest from the zero coupon bonds (“ZCB”). Of its 2004 debt portfolio, long-term debt accounted for 87% (comprising inter-company loans i.e. ZCB of THB41.1bn and financial lease obligation of THB18.3bn), while the remainder (13%) was for short-term debt. At end-2004, the company’s total adjusted debt net of cash to EBITDAR ratio remained high at 6.1x (end-2003; 6.1x). Its financial leverage is likely to improve in 2005 and 2006, driven by expected stronger EBITDAR growth and the prepayment of some series of ZCBs scheduled for 4Q05. Meanwhile, its liquidity position was supported by a cash balance of THB1.7bn at end-2004 and the standby credit facility from EOIC. While this credit facility is maturing in June 2006, Fitch notes that Esso (Thailand) expects the credit facility to be extended.
CONTACT: Wasant Polcharoen, Lertchai Kochareonrattanakul, Vincent Milton, Bangkok, Tel: +662 655 4755
Note to Editors: Fitch’s National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated ‘AAA’ and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as ‘AAA(tha)’ for National ratings in Thailand. Specific letter grades are not therefore internationally comparable.
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