PTTEP's outlook is stable: Moody's
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Moody's Investors Service has revised PTT Exploration and Production (PTTEP)'s outlook from negative to stable, following the recapitalisation in 2012.
PTTEP is rated "Baa1".
"PTTEP's stable outlook reflects the company's much strengthened financial position following a US$3 billion equity injection in late 2012, and takes into account the expected high level of support from its parent PTT, given that PTT subscribed to PTTEP's equity issuance up to its 65.29 per cent ownership level," said Simon Wong, a Moody's Vice President and senior analyst.
"With retained cash flow (RCF) to debt now expected to be well above 50-60 per cent in 2013-14, PTTEP now has sufficient flexibility to meet upcoming capex requirements and undertake smaller acquisitions without jeopardising its rating", adds Wong.
"The stable outlook also reflects our expectation that the company will maintain a prudent financial discipline and an appropriate debt capital structure for its rating, despite its large investment appetite," adds Wong, who is also Moody's Lead Analyst for PTT and PTTEP.
PTTEP last year was recapitalisaed by $3 billion to finance the acquisition of Cove Energy and for future capital expenditure. It has recently revised its acquisition strategy, focusing on
producing or near-producing exploration and production (E&P) assets in the Southeast Asian region, rather than on assets with long development lead times or which are not immediately reserve accretive. Moody's believes that this will over time reduce development risk, which remains high, evidenced by debt-to-proved developed reserves of over 10 times.
"However, PTTEP is expected to generate negative free cash flows in 2013 because of its high level of planned capex totaling $3.9 billion. While the company is expected to report positive free cash flows in 2014, the level will be constrained by its high ongoing capex plans," added Wong.
The company announced a capex plan of $15 billion for 2013-17 to support its ambitious target to double production to 600,000 boe/day by 2020 from the 2012 average daily production of approximately 313,293 boe/day.
Although Moody's expects PTTEP's debt to proved developed (PD) reserve to remain above 8 times in the medium term, its debt to average daily production and retained cash flow (RCF) to debt should improve in the same period because of rising production output. PTTEP's debt to PD reserves was 10.9 times as at end 2012 reflecting the long lead time to develop the KKD in Canada and Mozambique assets.
