Moody’s Investors Service (Moody’s) has affirmed Trinidad Petroleum Holdings Ltd ‘s (Trinidad Holdings) ratings and changed the outlook to stable from negative based on the view that the company’s operating and financial profile will remain solid and protective of its credit metrics and liquidity position.
In a statement Moody’s explained this view includes debt maturity in June 2022 of $286 million, which the company plans to refinance but would be able to repay, in case of need.
Trinidad Holding’s solid operating and financial performance offsets the deterioration in T&T’s credit profile, the rating agency said.
“Moody’s affirmed Trinidad Petroleum Holdings Ltd’s Ba3 corporate family rating, backed senior secured bank credit facility and backed senior secured ratings and b2 baseline credit assessment (BCA),” Moody’s said.
These ratings follow Moody’s announcement on November 19, 2021 that it had downgraded the Government’s rating to Ba2 from Ba1 and changed the outlook to stable from negative.
According to Moody’s, “The Ba3 ratings on Trinidad Holdings are based on its b2 BCA, which reflects the company’s intrinsic credit risk regardless of Government support considerations.
“In turn, Trinidad Holdings’ BCA is based on the credit profile of Heritage Petroleum Company Ltd (Heritage), an exploration and production (E&P) oil and gas company, the former’s main operating subsidiary.”
Heritage’s credit profile takes into consideration its small oil and gas production and asset base, Moody’s said, and its expectation of adequate cash generation and small production growth.
Heritage’s experienced management team also supports Trinidad Holdings’ ratings, Moody’s added.
Noting that Heritage’s reserve life is adequate at about eight years, Moody’s said despite the company’s long operating history, the E&P industry only recently became a core business.
According to Moody’s in 2020, Heritage managed to increase production, which had been declining for several years, and was able to replace reserves at a rate of 165 per cent.
“However, to maintain an annual reserve replacement rate of above 100 per cent to protect future cash generation, Heritage will have to manage its operating costs closely and work with partners to grow efficiently,” Moody’s advised.
It said the Government’s ability to provide support to both companies is measured by its Ba2 rating, weakened by the very high correlation between the Government and the company on credit factors that could cause stress on both simultaneously.
Further, Moody’s said Trinidad Holdings counts with adequate liquidity at Heritage
Moody’s also added that it expects Trinidad Holdings to have around $452 million in cash by the end of its fiscal year in September 2021, and generate enough cash flow from operations in the 12 months ending in September 2022 to cover annual interest payments of about $82million, debt amortisation of $383 million and capital spending of around $141 million up to September 2022.
Trinidad Holdings also counts on cash generated at other smaller subsidiaries, such as Paria and Moody’s also
estimated that Paria will generate approximately $90 million in EBITDA from September 2021 to September 2022.