Bangkok--7 Feb--TRIS Rating
TRIS Rating Co., Ltd. has assigned a “AAA” rating to the proposed Bt3,500 million senior debentures of PTT Exploration and Production PLC (PTTEP) at “AAA”. At the same time, TRIS Rating has affirmed the ratings of PTTEP and its current Bt2,500 million senior debentures (PTEP183A) at “AAA”. The outlook remains “stable”. The ratings continue to reflect PTTEP’s leading position in the petroleum exploration and production (E&P) industry in Thailand, its solid asset base, and the support received as the E&P arm of the Thai government. The ratings also take into consideration the company’s very strong financial profile and healthy cash flow, despite large capital expenditures planned for 2007-2009.
The “stable” outlook reflects TRIS Rating’s expectation that PTTEP will be able to maintain its strong financial position despite heavy capital expenditures during 2007-2009. Rising E&P costs and a challenge to maintain the life of its reserves are partially mitigated by current petroleum prices which remain strong. The company’s financial policy is expected to remain conservative to accommodate higher operational and political risks from its international operations.
TRIS Rating reported that PTTEP is the leading petroleum E&P company in Thailand. As of December 2005, its total proven petroleum reserves, including reserves from overseas projects, were 950 million barrels of oil equivalent (mmboe). Given its projected production of approximately 188,000 barrels of oil equivalent per day (boed), PTTEP’s reserve life should last 14 years, comparable
with world-class E&P companies which average 10 to 15 years. As of 31 December 2006, the company had 34 projects on hand with 10 projects being in the production phase and the remainder in the exploration and development phase. PTTEP was established to hold concession rights on behalf of the Thai government. As of November 2006, PTTEP was held 66% by the national oil and gas company, PTT PLC (PTT). PTT and PTTEP remain state enterprises as defined by the Thai law. As the state-owned E&P arm of PTT, PTTEP has leveraged its position to participate in high potential petroleum projects in Thailand and abroad.
TRIS Rating said, PTTEP’s operating efficiency is competitive, compared with E&P peers. Its three-year average finding and development (F&D) cost ending 2005 was US$4.76 per barrel of oil equivalent
(boe), which was lower than global E&P companies. Though lifting cost increased from US$1.25 per boe
in 2004 to US$1.82 per boe in 2005, this cost remains lower than global E&P companies. PTTEP’s financial position remains very strong. For the first nine months of 2006, sales increased to Bt66,191 million, a 44% rise from the same period in 2005. Net profit increased by 29.6% to Bt21,929 million. Its debt-to-capitalization ratio improved to 17.2% at the end of September 2006. The ratio of earnings before interest, tax, depreciation and amortization (EBITDA) interest coverage stood at 54.6 times for the first nine months of 2006. Operating margins before depreciation and amortization were relatively high, averaging 70%- 75% during the last three years.
PTTEP’s planned capital expenditures of Bt191,514 million during 2007-2011 is higher than previously planned. The rise is partly due to increased costs for the Arthit project and an upward revision of production. With capital spending of approximately Bt50,000 million per year during 2007-2009 and projected operating cash flow of Bt35,000 million-Bt40,000 million per year, the company should be able to fund most of its planned expenditures with internally generated cash. Additional borrowings of Bt10,000 million-Bt20,000 million per year would not weaken the balance sheet which is currently solid. In addition, the company has high liquidity supported by a combined balance of cash and short-term investments totaling Bt22,143 million as of September 2006, said TRIS Rating.
PTT Exploration and Production PLC (PTTEP)
Company Rating: Affirmed at AAA
Issue Ratings:
PTEP183A: Bt2,500 million senior debentures due 2018 Affirmed at AAA
Bt3,500 million senior debentures due 2010 AAA
Rating Outlook: Stable