S&P says oil price revision won’t immediately impact Petronas ratings

Mudajaya bagged RM489mil contract for Petronas' Rapid project in Pengerang, Johor.

KUALA LUMPUR: Standard & Poor's Ratings Services says its recent revision of its oil price assumptions won't immediately affect the ratings outlook of Petroliam Nasional Bhd’s (Petronas).

The international ratings agency said on Friday its revisions were US$40 per barrel of Brent crude in 2016 and US$45 in 2017.

However, it stated the recent revision of its oil price assumptions would not have an immediate impact on Petronas (foreign currency A-/Stable/--; local currency A/Stable/--; axAAA/--). 

“We expect Petronas to maintain its critical policy role for Malaysia, its large  direct and indirect contribution to the country's budget, and its integral link with the Malaysian government through full state ownership,” it said. 

S&P said the ratings and the outlook on the company and its notes would continue to mirror Malaysia’s sovereign credit rating on Malaysia (foreign currency: A-/Stable/A-2; local currency: A/Stable/A-1; axAAA/axA-1+). 

“Our revised oil price assumptions have no immediate effect on our 'aa' stand-alone credit profile for Petronas. 

“We expect the rise in Petronas' net leverage to be very gradual over the next two years, given the company's large cash position of about RM133bil as of Sept 30, 2015. 

“This is despite our forecast that Petronas' earnings before interest and tax (EBITDA) could decline to RM55bil to RM60bil in 2016 and RM60bil to RM65bil in 2017 under our revised price assumption of US$40 per barrel of Brent crude in 2016 and US$45 in 2017. 

“Those levels are about 20% lower than we had earlier anticipated and compare with a reported EBITDA of about RM125bil in 2014,” it said.

S&P forecasts Petronas' debt-to-EBITDA ratio at 0.5 times to 0.6 times in 2016 under its  revised price assumptions. The ratio will rise to about 0.8 times in 2017 because of lower EBITDA and higher net debt. 

“The ratio remains within our tolerance threshold of 1.0 times for a 'aa' SACP.  Nevertheless, it is higher than the debt-to-EBITDA ratio of about 0.5 times we had anticipated under our previous price assumptions,” it said.