Bangkok--15 Jul--Moody's Investors Service
Moody's Investors Service has today assigned an A3 rating with a negative outlook to the senior unsecured notes to be issued by PTTEP Australia International Finance Pty Ltd, a wholly-owned finance subsidiary of PTT Exploration and Production Public Company Limited (PTTEP).
The proposed notes will be irrevocably and unconditionally guaranteed by PTTEP. The proceeds will be used primarily for funding PTTEP's Montara project in Australia, and for general corporate purposes.
The A3 rating combines PTTEP's stand-alone rating of Baa1 with a one-notch uplift reflecting the likelihood of support from parent PTT Public Company Ltd (PTT; rated A3/negative).
The stand-alone Baa1 rating incorporates the stability afforded by the company's long-term gas sale contracts, providing cash flow visibility.
Countering these strengths are PTTEP's high medium-term development capex and increasing appetite for acquisitions, coupled with leverage.
The final A3 rating incorporates one-notch uplift based on expected support from the company's 65.42% parent, PTT, which itself is majority owned by Thailand's Ministry of Finance. PTTEP is strategically important within PTT's energy value chain, and there is close business integration between PTTEP and its parent.
PTTEP's negative ratings outlook reflects the negative outlook of PTT, which is in turn driven by the negative outlook of Thailand's sovereign rating.
Near-term upward rating pressure is limited given the negative outlook.
The outlook will be stabilized if PTT and Thailand's sovereign rating outlook is reverted to stable.
On the other hand, PTTEP's ratings could experience downward pressure if PTT and Thailand's sovereign ratings are downgraded, or if there is any reduction in the expected support from its parent PTT.
Downward rating pressure would also emerge if PTTEP's standalone fundamental strength weakens, reflected by adjusted RCF- sustaining capex / debt remaining at below 30-35%, which could be a result of 1) major disappointments in implementing its reserve replacement and expansion plans; 2) a material downturn in the energy sectors.
The last rating action on PTTEP was on June 28, 2010 when Moody's downgraded the company's local currency issuer rating to A3 from A2 with a negative outlook.
The principal methodology used in rating PTTEP was Moody's Global Independent Exploration and Production (E&P) Industry, published in December 2008 and available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website.
PTTEP is engaged in the exploration and production of crude oil, condensate and natural gas. Established by the Petroleum Authority of Thailand (now PTT) in 1985 as part of a national energy strategy, it is now a listed company with PTT retaining 65.42% ownership
Hong Kong
Renee Lam
Vice President - Senior Analyst
Corporate Finance Group
Moody's Asia Pacific Ltd.
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
Sydney
Terry Fanous
Senior Vice President
Corporate Finance Group
Moody's Investors Service Pty Ltd
JOURNALISTS: (612) 9270-8102
SUBSCRIBERS: (612) 9270-8100