Bangkok--22 Jul--Moody's Investors Service
Moody's Investors Service has today assigned an A3 rating with a negative outlook to the senior unsecured fixed-rate notes to be issued by PTTEP Australia International Finance Pty, a wholly-owned finance subsidiary of PTT Exploration and Production Public Company Limited (PTTEP, A3/negative).
The proposed 5-year notes, of upto USD250 million, will be irrevocably and unconditionally guaranteed by PTTEP. The proceeds will be used primarily for funding PTTEP's exploration, development and production activities, 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 PTT Public Company Limited (PTT, A3/negative) providing credit support in a distress situation.
The stand-alone Baa1 rating incorporates the stability and cash flow visibility afforded by the company's long-term gas sale contracts.
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. 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 July 13, 2010 when Moody's assigned an A3 rating with negative outlook on the company's guaranteed US$500 million debt.
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
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Renee Lam
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Corporate Finance Group
Moody's Asia Pacific Ltd.
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Philipp L. Lotter
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Moody's Singapore Pte Ltd.
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