Singapore, December 16, 2015 -- Moody's Investors Service has affirmed the Baa3 issuer and senior
unsecured bond ratings of Pertamina (Persero) (P.T.).
(Pertamina). At the same time, Moody's has also affirmed
the (P)Baa3 rating of Pertmina's $10 billion Global Medium-Term
Note program.
The outlook on the ratings is stable.
RATINGS RATIONALE
The rating actions follows sharp reduction in Moody's oil price
assumptions in light of continuing oversupply in the global oil markets.
Moody's now assumes the Brent crude, the international benchmark,
to average $43 per barrel and US$ 48 per barrel in 2016
and 2017 respectively. This marks a $10 per barrel and $12
per barrel reduction from its previous assumptions for 2016 and 2017 respectively.
Pertamina's Baa3 rating incorporates its baseline credit assessment (BCA)
of ba1, and one notch of uplift reflecting expectation of high support
from the Indonesian government (Baa3, stable) and very high dependence
between the two, under Moody's Joint Default Analysis approach.
'The affirmation of Pertamina's ratings reflects our expectation
that the deterioration of company's credit metrics arising from
low oil prices, albeit material, will be within the tolerance
levels of its ratings. The affirmation also incorporates our expectation
that the company will not materially increase its capital outflows from
current levels over the next 2- 3 years,' says Vikas
Halan, a Moody's Vice President and Senior Credit Officer.
For the 9 months ended September 2015, Pertamina has been able to
increase its oil & gas production volumes by nearly 10%,
which has partly mitigated the impact of the lower oil prices.
The company expects its production to increase by about 15-20%
over the next 2-3 years, which will also partly mitigate
further declines in oil prices.
Pertamina also has a substantial downstream refining and marketing business,
which has historically contributed over 90% to revenue but less
than 5% to its EBITDA. As regional refining margins remain
healthy and Pertamina improves its refinery efficiency, the contribution
from its downstream refining business will improve.
The outlook on the ratings is stable, reflecting the stable outlook
of Indonesia's sovereign rating. At the same time, Moody's
expects Pertamina to manage its capital expenditure and investment programs
in such a way that its financial metrics will remain supportive of its
ratings.
Given the close link between Pertamina's rating and the sovereign rating,
an upgrade of the latter would likely trigger an upgrade of the company.
An upgrade of BCA to baa3 in the current oil price environment is unlikely.
We will consider changing Pertamina's BCA to baa3 if the company demonstrates
sustained improvements in its credit profile and maintains financial discipline
as it pursues growth. Specific indicators include retained cash
flow to net debt exceeding 20% and EBIT to interest above 4x on
a consistent basis.
Pertamina's issuer rating would be under negative pressure, if a)
its BCA falls below ba2; or b) Indonesia's sovereign rating is lowered;
or c) there is change in relationship, albeit unexpected,
between Pertamina and the Indonesian government resulting in lower expectation
of extraordinary support.
The BCA may come under additional downward pressure if Pertamina makes
any debt-funded acquisitions or its earnings and cash flow decline
more than we expect owing to steeper decline in oil prices or the company's
production ramp up is slower than we expect. The BCA may also face
downward pressure if the company fails to reduce payments to its shareholder
in line with the declining profits or increase its capital investments
beyond the current levels.
Credit metrics indicative of such downward pressure include retained cash
flow to net debt falling below 10%-15%, EBIT
to interest declining below 2x-2.5x on a sustained basis.
The principal methodology used in these ratings was Global Integrated
Oil & Gas Industry published in April 2014. Other methodologies
used include the Government-Related Issuers published in October
2014. Please see the Credit Policy page on www.moodys.com
for a copy of these methodologies.
PT Pertamina (Persero) is a 100% Indonesian government-owned,
fully-integrated oil and gas corporation, with operations
in upstream oil, gas and geothermal exploration and production,
downstream oil refining, marketing, distribution, transportation
and trading of petroleum products.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Vikas Halan
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: (852) 3758 -1350
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Laura Acres
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
Moody's affirms Pertamina's Baa3 rating; outlook stable