Cheap oil to hit PTTEP but rating unlikely to suffer: Moody's
MOODY'S Investors Service says lower oil prices will weaken PTT Exploration and Production Public's financial results in 2015, such that its retained cash flow to adjusted debt will fall below Moody's tolerance level of 50 per cent for the company's "Baa1
“As we expect the deterioration in PTTEP’s credit profile in 2015 to be a temporary slippage – we do not anticipate a change in the company’s ‘Baa1’ issuer rating. We believe its credit metrics will recover to within its rating parameters in 2016,” said Vikas Halan, a Moody’s vice president and senior credit officer.
Moody’s expectations are based on price assumptions of US$55 per barrel in 2015 and $65 per barrel in 2016 for Brent crude.
Support from parent
“In addition, PTTEP’s issuer rating incorporates a one-notch uplift due to our expectation of extraordinary support from its parent, PTT Public Company Ltd. There is therefore scope for PTTEP’s final rating to be maintained, as a result of our assessment of parental support,” Halan said.
Moody’s analysis is contained in its just-released report titled “PTT Exploration & Production: Lower Oil Prices Weaken Q4 Results with Expectations of Further Weakening in 2015”, and is authored by Halan and Rachel Chua, a Moody’s associate analyst.
However, Moody’s report points out that downward pressure on PTTEP’s issuer rating will develop if the company makes a large debt-funded acquisition of non-producing assets, or further increases its aggressive $15.9-billion [Bt518-billion], five-year capital-expenditure plan, against the backdrop of its ambitious production target of 600,000 barrels of oil equivalent per day by 2020.
Other possible negative developments include high dividend distributions and oil prices remaining low. Moody’s expects prices to stay at or below $50 per barrel in the medium to long term. Moody’s also says the impact of the lower oil prices could have been more severe in last quarter if PTTEP had not been partially compensated by the increase in sales volume, as the Zawtika field in Myanmar began exporting natural gas in August.
