PT PERUSAHAAN GAS NEGARA TBK
Fitch Ratings has affirmed
The Outlook is Stable.
Saka's rating benefits from a two-notch uplift from its Standalone Credit Profile (SCP) of 'b-', based on our assessment of parent
The Stable Outlook reflects our view that Saka's operating profile will remain adequate with proved reserve life maintained at 6.7 years at end-2023 (2022: 6.2 years).
Key Rating Drivers
'Medium' Legal, Operational Incentive: We believe PGN has 'Medium' legal incentive to support Saka, as PGN's loans include joint several and cross-default clauses with subsidiaries. PGN has also included Saka as a co-borrower in a debt facility for up to
Low Leverage: We forecast Saka's EBITDA net leverage to improve to 0.5x in 2024, (2023:0.7x), as it fully repaid its outstanding bond of
Saka Misaligned in Group Structure: Saka's position in PGN's group structure remains uncertain. PGN has explicitly expressed its intention to provide liquidity support to Saka, but there is still lack of clarity about the subsidiary's position in the group after a restructuring of state-owned oil and gas companies that transferred the state's 57% ownership of PGN to
'b-' Standalone Profile: Saka's SCP reflects its small operating scale, with proved reserves stable at 72 million barrels of oil equivalent (mmboe) as of
However, reserves and production are still at the lower end of that of 'B' rated peers. Saka's proved reserve life of 6.7 years at end-2023 was based on its 2023 production volume of 10.7mmboe. We expect production to range between 10mmboe and 12mmboe per year over the next three years. In the absence of inorganic growth, Saka is likely to face challenges in maintaining its reserve profile on a sustained basis over the medium term.
Derivation Summary
Saka's 'b-' SCP is comparable with that of other small independent rated oil and gas companies globally. The ratings of
Saka's low production of 33 thousand of barrels of oil equivalent per day (mboepd) is similar to that of 'B' rated peers. We expect Saka's production to average around 37mboepd, which is still lower than GTE's forecast production of 47mboepd and Frontera's 42mboepd. GTE and Frontera have proved reserve lives of 4.0 years and 8.6 years, respectively. Saka is smaller in scale comparatively and is likely to face greater challenges in sustaining its reserve profile, which explains the difference in their standalone assessments.
Key Assumptions
Fitch's Key Assumptions Within Our Rating Case for the Issuer
Oil (Brent) price of
Natural gas sales prices based on contracted Indonesian production prices for the next three years;
Oil and gas production of 33mboepd in 2024, 36mboepd in 2025, and 40mboepd in 2026 (2022: 33mboepd, 2023: 29mboepd)
Capex of around
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade:
Strengthening of linkages with PGN upon clarity of Saka's position within the group structure;
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade:
Weakening of linkages with PGN in the absence of significant additional support and a deterioration in Saka's position within the group structure;
Sensitivities for Saka's SCP
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade:
Sustained improvement in reserve life to above seven years while maintaining production levels above 40mboepd and conservative financial profile with EBITDA net leverage of 2.0x or below.
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade:
Weakening of Saka's business profile, including rapidly declining reserves or production in the absence of reserve acquisitions, or a weakening of its liquidity position.
Liquidity and Debt Structure
Liquidity Support from Parent Required: We expect Saka to utilise a
Issuer Profile
Saka, a wholly owned subsidiary of PGN, engages in oil and gas exploration and production and acts as PGN's upstream arm.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
Public Ratings with Credit Linkage to other ratings
Saka's ratings benefit from a two-notch uplift from its SCP based on our assessment of moderate linkages with the parent.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
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