PTTEP's credit rating not affected by Cove acquisition: S&P

 

 

PTTEP is rated "BBB" with negative outlook. 

S&P today issued a report, titled "What's The Credit Impact Of PTT Exploration and Production's Growth Strategy?"

"Our ratings and outlook on PTTEP remain unchanged despite the company's recent acquisition of UK-based Cove Energy for about US$2.2 billion," said Standard & Poor's credit analyst Andrew Wong. "Our ratings already factor in an acquisition of this magnitude and the associated additional debt. PTTEP's business risk profile is also unlikely to improve in the short term because Cove's assets are still in the exploration stage and are not reflected in the company's reserves profile."

The rating agency believes that PTTEP's plans to raise about US$3 billion by issuing new shares is credit positive and could reduce the company's ratio of debt to capital to more manageable levels. However, Standard & Poor's would consider the equity raising in its analysis only once the process is completed.

"The capital raising may not necessarily lead us to revise the rating outlook to stable from negative and may not be sufficient to reduce PTTEP's reliance on debt to fund future growth," said Wong. "The current market expectation is that PTTEP will raise about US$3 billion through the share issuance. While this can adequately cover the cost of the Cove acquisition, we believe PTTEP may still require additional debt to fulfill its stated growth plans of boosting production to 900 thousand barrels of oil equivalent per day by 2020."

It expects PTTEP's recent acquisitions and growth strategy to improve the company's business and financial risk profiles in the long term. Nevertheless, such improvement could come at the expense of the company's financial risk profile in the interim period.