Monday, February 24, 2020

PTTEP’s equity content rating upped to minimal

Jul 01. 2019
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By The Nation

S&P Global Ratings on Monday revised its assessment of the equity content in PTT Exploration and Production Plc’s (PTTEP) foreign currency (BBB+/Stable) and local currency (A-/Stable) from intermediate to minimal. The rating is related to PTTEP’s US$500 million (Bt15.3 billion) outstanding perpetual securities.

This is in response to PTTEP’s repayment of similar hybrid securities on their first call date on June 19. This revision does not affect S&P’s assessment of the company’s “BBB” rating on the company’s standalone credit profile (SACP). 

The ratings agency said it believes PTTEP is committed to maintaining hybrid securities as part of the company’s capital structure until the first call date in 2022. 

However, PTTEP’s longer-term commitment to keeping these hybrid instruments for loss-absorption or cash conservation is uncertain, S&P said, adding that it is also considering PTTEP’s decision not to replace its hybrids repaid on June 19. 

Initially S&P treated half of the $500-million hybrid securities as equity and the rest as debt. Revising the equity content to minimal will increase the calculation on PTTEP’s adjusted debt by $250 million.

PTTEP’s creditworthiness has been largely stable since the issuing of the hybrid securities in 2014, due to the company’s strong affiliation with its parent PTT Plc. PTTEP has also maintained minimal leverage through last year. 

In parallel, its operating profile has weakened due to its reducing reserve life. PTTEP has also lined up two large acquisitions worth $2.7 billion to be completed by the end of this year. 

PTTEP has also made a final investment decision on its 8.5 per cent-owned liquefied natural gas project in Mozambique, and the project is set to produce gas most likely by 2024. 

PTTEP also won the bid for new concessions covering the Bongkot and Erawan fields in December last year and these could significantly boost its reserves over the next three to five years.

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