Fitch revises outlook on PTT and PTTEP to negative, affirms ‘BBB+’ rating

Fitch Ratings has revised the International Long-Term Issuer Default Rating (IDR) outlooks of PTT and PTT Exploration and Production (PTTEP) to negative from stable, while affirming their long-term foreign-currency IDRs and PTTEP’s senior unsecured notes rating at BBB+.

The move mirrors Fitch’s downgrade of Thailand’s sovereign rating outlook to negative from stable on September 24, while maintaining the country’s BBB+ rating.

Under Fitch’s Government-Related Entities Rating Criteria, PTT’s IDR and outlook cannot exceed the sovereign rating, as there is no ring-fencing structure preventing the state from accessing the company’s cash and assets. As a result, the sovereign outlook revision directly affects PTT.

PTTEP’s outlook revision also reflects that of its parent PTT. Fitch assesses PTT’s strategic and operational incentives to support PTTEP as high, in line with its Parent and Subsidiary Linkage Rating Criteria, which underpins the equalisation of PTTEP’s ratings with those of PTT.

Fitch added that PTT’s National Long-Term Rating remains unaffected, since national ratings measure relative creditworthiness among issuers within Thailand rather than against international peers.

Factors affecting the rating:

Government incentives to support PTT

Fitch views PTT’s role in supporting government energy policy as very strong. The company plays a critical role in ensuring Thailand’s energy security. A default by PTT would directly disrupt oil and natural gas supplies, undermine electricity generation, and weaken the country’s energy security.

Fitch also considers the contagion risk from a potential PTT default to be very high. Given PTT’s role as a proxy for the state and as a major state-owned borrower and bond issuer, a default would significantly affect the government’s ability to access domestic and international funding and would raise borrowing costs for both the sovereign and other state-owned enterprises.

Government responsibility to support PTT

Fitch assesses the government’s decision-making and oversight of PTT as strong, with the Finance Ministry directly and indirectly holding a 63% stake. While the government has a policy for PTT to operate on a commercial basis, it continues to oversee the company’s major investment and strategic decisions.

Fitch also considers the precedent of support to be high. The government has historically provided financial backing to state-owned enterprises in the power sector, which is equally critical to national interests. 

Fitch believes this indicates a strong likelihood of government support for PTT should it require assistance, even though no direct financial support has been extended so far, as PTT maintains a strong financial profile.

PTT’s incentives to support PTTEP

Fitch believes PTT has a high level of strategic incentives to support PTTEP, its sole upstream subsidiary and a core part of PTT’s fully integrated oil and gas value chain. 

This assessment is underpinned by PTTEP’s significant contribution to the group’s earnings, accounting for around 60% of consolidated Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) in 2024. 

Importantly, key feedstock for PTT’s gas separation plants, as well as gas supplies for power generation, are sourced from PTTEP.

Management and brand overlap

Fitch also assesses the level of management and brand integration between PTT and PTTEP as high. The two companies share board members and senior executives, with frequent rotation of management across PTT group subsidiaries, including PTTEP. 

In addition, PTTEP’s strategic direction is closely aligned with PTT’s overall business strategy, reinforcing the strong parent-subsidiary linkage.

Adequate standalone profile for PTTEP

Fitch expects PTTEP’s net debt/EBITDA ratio to remain below 0.5x over the next two to three years, consistent with a standalone credit profile of ‘bbb’. 

This is despite a weaker financial structure compared with its current net cash position, due to higher capital expenditure and lower EBITDA, which will result in negative free cash flow during 2025–2027.

Stable profitability

PTTEP maintains stronger EBITDA and margins than peers with higher crude oil exposure, supported by its significant proportion of gas sales (71% in 2024). Most gas sales are linked to the trailing 6–12 month average of crude oil prices, providing stability. 

In addition, PTTEP benefits from low operating costs, which further differentiates its profitability from peers.

Strong standalone profile maintained

Fitch expects PTT’s financial profile to remain consistent with a standalone credit profile of ‘bbb+’, even though its debt capacity is likely to weaken somewhat. The company’s EBITDA net leverage is projected to rise to around 1.9x–2.0x in 2025–2026, from 1.6x in 2024, but still in line with its current standalone rating level.

Fitch anticipates EBITDA to soften due partly to weaker upstream operations from lower oil and gas prices, as well as a slower-than-expected recovery in the petrochemical segment. 

Nonetheless, PTT retains investment flexibility, although Fitch has not factored this assumption into its base-case forecasts.