Bangkok--18 Mar--TRIS Rating TRIS Rating Co., Ltd. has affirmed the ratings of PTT Exploration and Production PLC (PTTEP) and its current senior debentures at “AAA” with “stable” outlook. 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 its healthy cash flow, despite increased cost pressure and large capital expenditures planned for 2008-2009. The “stable” outlook reflects TRIS Rating’s expectation that PTTEP will be able to maintain its strong financial position despite heavy capital expenditures in 2008-2009. The risks from rising E&P costs and the challenge of maintaining the life of its reserves are partially mitigated by high petroleum prices. The company’s financial policy is expected to remain conservative to accommodate higher operating and political risks in its overseas operations. TRIS Rating reported that PTTEP is the leading petroleum E&P company in Thailand. It was established in 1985 to hold petroleum concession rights on behalf of the Thai government. As of January 2008, PTT PLC (PTT), the national oil and gas company, held a 65.7% stake in PTTEP. PTT and PTTEP remain state enterprises as defined by Thai law. As the state-owned E&P arm of PTT and the Thai government, PTTEP has leveraged its position to participate in high potential petroleum projects in Thailand and abroad. TRIS Rating said that as of December 2007, PTTEP’s total proven petroleum reserves, including reserves from overseas projects, were 946 million barrels of oil equivalent (mmboe). Given the projected production of approximately 220,000 barrels of oil equivalent per day (boed), PTTEP’s reserves should last about 12 years, which is comparable to average reserves at world-class E&P companies of 10 to 15 years. As of December 2007, the company had 38 projects on hand, 12 of which were in the production phase, with the remainder in the exploration and development phases. PTTEP’s operating efficiency is competitive compared with international E&P peers. Its lifting cost increased from US$1.82 per barrel of oil equivalent (boe) in 2005 to US$2.33 per boe in 2007. Though its three-year average finding and development (F&D) cost ending 2007 significantly rose to US$12.11 per boe, this was in line with costs of global E&P companies. PTTEP’s financial position remains very strong. In 2007, its sales increased by 5.1%, to Bt90,764 million, while its net profit increased by 1.5%, to Bt28,455 million. At the end of December 2007, its debt-to-capitalization ratio was very healthy at 14.8%. The earnings before interest, tax, depreciation and amortization (EBITDA) interest coverage ratio was 79.3 times in 2007. Operating margins before depreciation and amortization were relatively high, averaging 70%-73% over the last three years. The company’s planned expenditures of Bt286,898 million for 2008-2012 are relatively the same as previously planned. Approximately 67% of this budget is for capital expenditures, with activities mainly in Thailand. With capital spending of approximately Bt50,000-Bt60,000 million per year during 2008-2009 and projected operating cash flow of Bt45,000-Bt50,000 million per year, PTTEP should be able to fund most of its planned capital expenditures from internal cash flow. 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, with a combined balance of cash and short-term investments of Bt24,013 million as of December 2007, said TRIS Rating.