Thought of the Day

25 November 2015

What is happening with Petroleum Co. of Trinidad & Tobago?

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Downgraded To ‘BB’ From ‘BB+’ On Lower Commodity Price Assumptions; Outlook Stable (see report attached).

S&P Downgrades Petrotrin on Lower Commodity Price Assumptions

— Following the downward revision of our oil and natural gas price deck
assumptions, we believe Trinidad and Tobago-based oil and gas company
Petrotrin’s financial metrics will weaken more than originally expected during
the next 12-18 months.
— We are lowering the corporate credit rating on Petrotrin to ‘BB’ from
‘BB+’. At the same time, we are revising the stand-alone credit profile (SACP)
on the company to ‘b-‘ from ‘b’.
— The stable outlook reflects our expectation for ongoing and
extraordinary government support if needed, an improvement in Petrotrin’s
refinery operations, and higher oil prices in the next few years.

MEXICO CITY (Standard & Poor’s) Nov. 24, 2015–Standard & Poor’s Ratings
Services said it today lowered its long-term corporate credit and senior
unsecured debt ratings on Petroleum Co of Trinidad & Tobago Ltd (Petrotrin) to
‘BB’ from ‘BB+’. The outlook is stable.

The downgrade stems from our expectation that Petrotrin’s credit metrics will
weaken further in the next 12-18 months due the recent revision of our
hydrocarbon price assumptions (see “Standard & Poor’s Revises Its Crude Oil
And Natural Gas Price Assumptions,” published Sept. 24, 2015). We no longer
expect the company’s debt to EBITDA to return to less than 5.0x within the
next few years. Funds from operations (FFO) to debt will remain at levels of
less than 12%. Although we expect that Petrotrin will rollover its short-term
loans–thanks to its sound relationship with banks due to its government
ownership–we believe liquidity is very tight to cover its capital
expenditures (capex) needs, which could hamper expected production increases.

Our ratings on Petrotrin reflect the company’s weaker operating efficiency
relative to its peers, primarily measured by utilization rates, and the
occurrence of downtime or outages. It also reflects Petrotrin’s limited
geographic diversification and asset concentration in refining and oil and gas
exploration and production. The company has stabilized the declining trend in
its oil production through continued drilling and reactivation activities. In
addition, we expect refinery performance to improve and utilization rates to
reach 70%-75% in the next few years. Moreover, the company is lowering the
sulfur content in its diesel thanks to its new ultra-low sulfur diesel plant
that will allow it to boost volumes of higher quality diesel and gasoline.

The stable outlook reflects our expectation that Petrotrin will maintain its
good competitive position in the Caribbean
market for refined oil products, our expectation for ongoing and extraordinary
government support if needed, an improvement in the company’s refinery
operations, and higher oil prices for the next few years

We could downgrade Petrotrin in the next six months to one year if oil prices
continue to decrease, leading us to assess Petrotrin’s capital structure as
unsustainable, and/or if we perceive a decline in government support that
leads us to believe liquidity could be hampered even further.

Although unlikely in the near term, we could upgrade Petrotrin if credit
metrics strengthen within the next 12 months and if it considerably improves
its liquidity position. Such a scenario would require debt to EBITDA below 5x
and FOCF to debt above 10%, which would mean an improvement in the company’s
core operations.


Related Criteria
— Rating Government-Related Entities: Methodology And Assumptions, March
25, 2015
— Key Credit Factors For The Oil Refining And Marketing Industry, March
27, 2014
— Methodology And Assumptions: Liquidity Descriptors for Global
Corporate Issuers, Jan. 2, 2014
— Corporate Methodology, Nov. 19, 2013
— Corporate Methodology: Ratios and Adjustments, Nov. 19, 2013
— General Criteria: Methodology For Crude Oil And Natural Gas Price
Assumptions For Corporates And Sovereigns, Nov. 19, 2013

— Country Risk Assessment Methodology And Assumptions, Nov. 19, 2013
— Methodology: Industry Risk, Nov. 19, 2013
— General Criteria: Methodology: Management And Governance Credit
Factors For Corporate Entities And Insurers, Nov. 13, 2012


Complete ratings information is available to subscribers of Ratings Direct at and at All ratings affected by
this rating action can be found on Standard & Poor’s public Web site at Use the Ratings search box located in the left

Primary Credit Analyst: Marcela Duenas, Mexico City (52) 55-5081-4437;
Secondary Contact: Fabiola Ortiz, Mexico City (52) 55-5081-4449;


What now?

Aleem Khan reports that : Petrotrin Flags More Cost Cutting After S&P Lowered Rating

2015-11-25 15:27:51.608 GMT

(Bloomberg) — With fall in oil prices past yr, Petrotrin “revising its strategies and lowering capital and operating expenses in all areas of its operations,” says in statement.

* Cost-cutting measures “will become evident” coming weeks
and months; all options are being reviewed
* NOTE: S&P Downgrades Petrotrin On Lower Commodity Price

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