Published on 19 Oct 2023.
RAM Ratings has affirmed the AAA/Stable/P1 corporate credit ratings of state-owned Petroleum Sarawak Berhad (PETROS or the Group). Concurrently, we have affirmed the AAA/Stable rating of the Multi-Currency Islamic Medium-Term Notes of up to RM15 billion (2021/2051) issued by PETROS’s wholly owned subsidiary, Petroleum Sarawak Exploration & Production Sdn Bhd.
The ratings mirror Sarawak’s State Implicit Strength in view of the Group’s strategic role in developing the state’s sizeable oil & gas reserves. As income from petroleum sales tax and royalties accounts for the bulk of the Sarawak government’s revenue, we expect PETROS to derive regulatory support and ready financial assistance from the state government, if required. This year, the Group formulated its greenhouse gas reduction action plans, alongside other sustainability-related policies. In line with Sarawak’s green agenda and aim to become a prominent Carbon Capture Utilisation Storage (CCUS) player, PETROS was issued the state’s first CCUS licence in March 2023 and appointed as its resource manager.
Lofty commodity prices had boosted the Group’s revenue and pre-tax profit to a respective RM1.8 bil and RM0.8 bil in FY Dec 2022 (FY Dec 2021: RM1.4 bil and RM0.5 bil). Thanks to strong cash flows generated from three production sharing contracts, in which PETROS acquired participating interests effective 1 January 2023, revenue and pre-tax profit climbed further to RM2.1 bil and RM0.9 bil, respectively, in 1H fiscal 2023 despite lower crude oil and natural gas prices (1H fiscal 2022: RM0.9 bil and RM0.4 bil). Going forward, these metrics are expected to be robust although remaining susceptible to commodity prices.
Owing to a cumulative sukuk issuance of RM3 bil in November 2022 and February 2023, PETROS’s gearing ratio rose to 2.56 times as at end-June 2023 (end-June 2022: 1.47 times). The retention of profits from upstream investments is expected to moderate gearing over time. On the back of a heavier debt load, annualised debt to operating profit before depreciation, interest and tax – another measure of leverage – increased to 1.64 times as at end-June 2023 (end-June 2022: 1.16 times) while funds from operations debt coverage was a lower 0.53 times (end-June 2022: 0.71 times). These financial metrics are still viewed to be strong as debt coverage ratios are anticipated to stay stable in the near term, barring further acquisitions and commodity price volatility.
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Ratings on Petroleum Sarawak Berhad