Trinidad Petroleum Holdings Limited 'BB' Ratings Placed On CreditWatch Negative Amid Sharply Lower Crude Oil Prices

  • Trinidad and Tobago-based oil and gas company Trinidad Petroleum Holdings Ltd. (TPH) could face weaker credit metrics following our March 19, 2020, revision of oil and gas price assumptions.
  • On March 27, 2020, S&P Global Ratings placed its long-term 'BB' issuer credit and issue-level ratings on TPH on CreditWatch with negative implications. The CreditWatch placement indicates a high likelihood of a downgrade in the three next month due to the company's exposure to lower crude oil prices and an economic downturn that could derive in a decline in cash generation.
  • We plan to resolve the CreditWatch listing once we have greater clarity on the potential impact of credit metrics if the company does not take adequate steps to preserve its financial profile.
MEXICO CITY (S&P Global Ratings) March 27, 2020—S&P Global Ratings took rating actions described above. We placed TPH on CreditWatch negative to reflect the heightened risk of a downgrade in the next 90 days or so if the company fails to preserve its financial profile and liquidity. TPH is currently exposed to profit loses amid the sharp drop in crude oil prices and industry's lower demand stemming from the COVID-19 crisis.
Our latest revision to our crude oil and gas price assumptions reflect the price war between Saudi Arabia and Russia as well as a likely massive drop in demand due to COVID-19. The revised price deck includes an average annual price assumption for Brent crude oil of $30 per barrel (bbl; previous $40/bbl) for 2020 and $50/bbl (versus $50/bbl) for 2021 (see "S&P Global Ratings Cuts WTI And Brent Crude Oil Price Assumptions Amid Continued Near-Term Pressure" published March 19, 2020). We believe these prices will weaken TPH's financial position, undermining its liquidity that could require the extraordinary financial support from the government to meet its operating and financial commitments.

We may lower the rating by at least one notch if TPH doesn't take effective and timely actions to preserve its financial profile amid the significantly depressed oil market conditions. This could occur if TPH's production drifts significantly from our expectations, or if oil prices remain below our current price deck and the company is unable to reduce costs, resulting in lower EBITDA.
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