TRIS Rating Co., Ltd. has announced an affirmation to the company rating of PTT Exploration and Production PLC (PTTEP) and the ratings of PTTEP’s 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, solid asset base, the support received as the E&P arm of the Thai government, and strong financial profile. The ratings also take into consideration the large capital expenditures planned for 2010-2014 and the execution risk in overseas operations.
The “stable” outlook reflects TRIS Rating’s expectation that PTTEP will be able to maintain its healthy financial position, despite the large capital expenditures planned for 2010-2014. The company’s financial policy is expected to remain conservative to accommodate the high fluctuations in petroleum prices and higher operating risk from 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 February 2010, PTT PLC (PTT), the national oil and gas company, held a 65.4% stake in PTTEP. PTT and PTTEP remain state enterprises as defined by Thai law. As the 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, as of December 2009, total proven petroleum reserves owned by PTTEP, including reserves from overseas projects, were 1,099 million barrels of oil equivalent (mmboe), a 16.4% increase from 2008. The increase in reserves derived mainly from the M9 project, as PTTEP succeeded in concluding terms and conditions of the gas sales agreement (GSA) with PTT and the Myanmar government. Reserves from overseas projects constituted 40% of total proven reserves in 2009, rising from 31% in 2008. Given the sales volume of 233,756 barrels of oil equivalent per day (boed) for 2009, the reserves should last about 12 years, which is comparable to reserves at world-class E&P companies of 10 to 15 years. As of February 2010, the company had 42 projects on hand, 19 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$2.46 per barrel of oil equivalent (boe) in 2008 to US$3.16 per boe in 2009, due mainly to the high lifting costs in new production projects. The three-year average cost ending in 2009 for finding and development (F&D) decreased to US$11.10 per boe from US$15.67 per boe in 2008, as the amount of reserves increased. The company’s financial position remains strong. As of December 2009, the debt-to-capitalization ratio was healthy at 33.4%, though up from 13.8% in 2008, due to heavy capital expenditures for the developments of the Arthit North and the Malaysia-Thailand joint development area (MTJDA) projects and acquiring many projects in Australia. The earnings before interest, tax, depreciation and amortization (EBITDA) interest coverage ratio was 46.2 times in 2009. Due to softer petroleum prices in 2009 compared with 2008, sales decreased by 12.9% to Bt115,548 million, while sales volume increased by 6.6% to 233,756 boed. The operating margin before depreciation and amortization remained relatively high at 71.6% in 2009, slightly down from 74.1% in 2008. Net profit decreased by 46.8% to Bt22,154 million, as the company recorded the expenses of Bt9,086 million for an oil and gas leak and fire incident in the Montara field, Australia. The additional expenses for this incident have been estimated at approximately Bt1,000-Bt2,000 million in 2010. The company expects to receive an insurance payment of US$226 million during 2010-2011. The start-up of the Montara project will be delayed to the second half of 2011.
Planned expenditures for 2010-2014, which include capital and operating expenditures, of Bt429,096 million are lower than the previous plan. Approximately 65% of this budget is for capital expenditures, with investments mainly in Thailand (59%), Southeast Asia (24%), and Australia (13%).
Capital spending of approximately Bt70,000-Bt80,000 million per year during 2010-2011 are projected to be funded largely through operating cash flow of Bt50,000-Bt60,000 million per year. Additional debt of Bt15,000-Bt20,000 million per year would slightly weaken the healthy balance sheet. However, the company has high liquidity, with a combined balance of cash and short-term investments of Bt48,678 million as of December 2009, said TRIS Rating. -- End