Thai Oil Public Co. Ltd.

The negative outlook on Thai Oil mirrors that on the local currency rating on PTT and reflects mounting pressure on PTT's creditworthiness, given unsupportive industry conditions. We may lower the rating on Thai Oil if: We lower the local currency rating on PTT; or Thai Oil's importance to its parent diminishes, indicated by weaker integration (e.g. the termination of crude oil supply or product offtake by PTT), or a reduction in PTT's shareholding of the company. This could result in a lack of timely and sufficient financial and operational support from PTT to preserve Thai Oil's creditworthiness. We may revise downward Thai Oil's stand-alone credit profile (SACP) by another notch if the company is unable to maintain its operating performance

...Unsupportive earnings conditions will largely outweigh Thai Oil Public Co. Ltd.'s operational optimization plan in 2020. The industry downturn and recessive economic outlook will disrupt Thai Oil's earnings performance for the rest of 2020 and well into 2021-2022. The company's refining complexity allows it to adjust its product yields to maximize profits. However, a collapse in refining spreads in the first half of 2020 will offset such benefit. We expect Thai Oil's reported EBITDA, excluding inventory impact, to be up to Thai Baht (THB) 30 billion over 2020-2021, compared to THB37 billion in 2017 alone, at the industry's peak. This reflects a worsening magnitude of the down cycle. Sustained capital spending will keep debt level elevated over the next two to three years. Despite weakening cash flow generation, Thai Oil's capital expenditure (capex) will remain high given its committed investment in the Clean Fuel Project (CFP). The company has deferred about 10% of its capex in 2020 to...

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