Sep 2018 Financial News

Moody's reviews Petrotrin's B1 ratings for downgrade

Sep 26, 2018

New York, September 25, 2018 -- Moody's Investors Service (Moody's) placed Petroleum Co. of Trinidad & Tobago's (Petrotrin) B1 corporate family rating and senior unsecured debt ratings on review for downgrade.

This rating action was based on the lack of clarity regarding Petrotrin's new business profile and strategy as well as increasing liquidity risk related to the approaching maturity of the 2019 bonds.

Ratings placed under review:

Issuer: Petroleum Co. of Trinidad & Tobago (Petrotrin)
Corporate Family Rating, Placed Under Review for Downgrade, currently B1
Senior Unsecured Regular Bond/Debenture, Placed Under Review for Downgrade, currently B1
Underlying Senior Unsecured Regular Bond/Debenture, Placed Under Review for Downgrade, currently B1

Outlook Actions:

Issuer: Petroleum Co. of Trinidad & Tobago (Petrotrin)

Outlook, Changed To Rating Under Review From Stable

RATINGS RATIONALE

Petrotrin has a weak financial condition, reflected in its high adjusted debt leverage of 6.2 times and low adjusted interest coverage of 2 times in March 2018. In addition, the government recently announced that it will close Petrotrin's refinery and the company will focus on its upstream exploration and production business.

Petrotrin's new business profile and strategy is still unclear, which put to question its medium-term financial prospects. In 2017, the company's oil and gas production was 49,084 boe, which is considered small in the universe of exploration and production companies.

Petrotrin also faces increased liquidity risk related to $850 million in global bonds that mature in August 2019. Petrotrin's total adjusted debt in March 2018 amounted to close to $2 billion, out of which about $600 million was short term debt.

Although Moody's believes that the level of implicit government support to the state owned company has not changed and continues to be very high, Petrotrin's weak financial condition and
liquidity, combined with uncertainties regarding the viability of its business transformation, raise questions about its intrinsic credit profile.

During the ratings review, Moody's will focus on Petrotrin's business plan and strategy regarding oil and gas exploration and production activities, including operating efficiency and earnings prospects, technology capability, and the size and sources of capital needed to sustain or increase reserves and production. The analysis will also review Petrotrin's plans around sale of fuel in the country as well as the company's financial management plans and alternative sources of liquidity.

Based in Pointe-a-Pierre, Trinidad & Tobago, Petrotrin is an integrated petroleum company 100% owned by the government. The company has an effective monopoly position in oil refining and wholesale marketing operations and some exploration and production activity. Petrotrin owns the country's sole refinery, which has a crude distillation capacity of 175,000 bpd, with a full conversion capacity of 168,000 bpd and a Nelson complexity rating of 8.6.

The methodologies used in these ratings were Refining and Marketing Industry published in November 2016, and Government-Related Issuers published in June 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.
 

Source:
Moody's Investors Services
Tuesday 25 September, 2018