Bangkok--24 May--TRIS Rating
TRIS Rating Co., Ltd. has affirmed the company rating of PTT Exploration and Production PLC (PTTEP) and the ratings of its current debentures at “AAA”. At the same time, TRIS Rating has assigned the “AAA” rating to PTTEP’s proposed up to Bt12,000 million senior debentures. The outlook remains “stable”. The ratings continue to reflect PTTEP’s leading position in the petroleum exploration and production (E&P) industry in Thailand, 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 petroleum prices which are currently 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 2006, its total proven petroleum reserves, including reserves from overseas projects, were 923 million barrels of oil equivalent (mmboe). Given the projected production rate of approximately 188,000 barrels of oil equivalent per day (boed), PTTEP’s reserves should last 13 years, comparable with world-class E&P companies which average 10 to 15 years. As of 31 December 2006, the company had 34 projects in hand with 11 projects in the production phase and the remainder in the exploration and development phase.
TRIS Rating said, PTTEP was established to hold concession rights on behalf of the Thai government.
As of March 2007, PTTEP was held 66.5% by the national oil and gas company, PTT PLC (PTT). PTT and PTTEP remain state enterprises as defined by 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.
PTTEP’s operating efficiency is competitive compared with E&P peers. Its three-year average finding and development (F&D) cost ending 2006 was US$10.11 per barrel of oil equivalent (boe). Though lifting cost increased from US$1.82 per boe in 2005 to US$2.13 per boe in 2006 but it decreased slightly to US$2.08 in the first quarter of 2007. This cost remains lower than global E&P companies.
PTTEP’s financial position remains very strong. In 2006, sales increased to Bt86,339 million, a 30.1% rise from 2005. Net profit increased by 18.2% to Bt28,047 million. The debt to capitalization ratio rose slightly to 12.1% at the end of March 2007. The earnings before interest, tax, depreciation and amortization (EBITDA) interest coverage ratio stood at 88.0 times for the first three months of 2007. Operating margins before depreciation and amortization were relatively high, averaging 70%-75% during the last three years.
TRIS Rating said that PTTEP’s planned capital expenditures of Bt191,514 million during 2007-2011 are 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-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-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 Bt28,192 million as of March 2007.