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Moody's Investors Service has expressed concern about the “lack of clarity” in state owned Petrotrin’s new business profile and strategy and has put the company's B1 Corporate Family Rating and senior unsecured debt ratings on review for downgrade.
In a September 25 report, Moody’s said Petrotrin's “weak financial position” is reflected in its high adjusted debt leverage of 6.2 times and low adjusted interest coverage of 2 times in March 2018.
It said while the government recently announced it will close Petrotrin's refinery and the company will focus on upstream exploration and production, "the new business profile and strategy is still unclear, and this puts into question the company’s medium-term financial prospects."
In 2017, Petrotrin’s oil and gas production was 49,084 barrels per day, which Moody’s said is considered small in the universe of exploration and production companies. The agency said Petrotrin also faces increased liquidity risk related to US$850 million in global bonds that mature in August 2019.
The state owned energy company's total adjusted debt in March was close to $2 billion, out of which about $600 million was short term debt.
Although Moody's believes the level of implicit government support to the state-owned company has not changed and continues to be very high, the company's weak financial condition and liquidity, combined with uncertainties about the viability of its business transformation, “raise questions about its intrinsic credit profile.”
The ratings agency will focus on the company’s business plan and strategy for oil and gas exploration and production, 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 the company's plans for sale of fuel.
Moody’s swill also look at the company's financial management plans and alternative sources of liquidity.
In its report Moody’s said Petrotrin has “an effective monopoly position in oil refining and wholesale marketing operations and some exploration and production activity.” It owns the country's sole refinery, which has a crude distillation capacity of 175,000 barrels per day (bpd) with a full conversion capacity of 168,000 bpd and a Nelson complexity rating of 8.6.
In May 2017, Moody's downgraded Petrotrin's corporate family rating and senior unsecured debt ratings to B1 from Ba3. The agency also lowered Petrotrin's baseline credit assessment to caa1 from b3 with a stable outlook. Those rating actions were linked to Moody's April 25, 2017 downgrade of the government of Trinidad & Tobago bond ratings to Ba1 from Baa3.
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