• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

S&P Upgrades Ratings of Teikoku Oil to A-Minus

Posted on: Thursday, 14 July 2005, 12:01 CDT

Jul. 14--TOKYO -- Standard & Poor's said Thursday it has upgraded its long-term issuer credit rating on Teikoku Oil Co. to A-minus from BBB-plus, with a stable outlook.

The U.S. credit-rating agency attributed the rating action to the limited impact of deregulation of the natural gas market. It said it expects that the oil and gas developer's risk from overseas business and adverse effects from the company's large capital investment on its financial profile will be limited.

The upgrading came on the day the Japanese government granted the company concessions to conduct experimental drilling in the East China Sea near natural gas fields being explored by a Chinese consortium.

S&P foresees that Teikoku Oil will withstand the pressure on prices stemming from deregulation and competition because the company has Japan's largest natural gas reserves in Niigata Prefecture that support its strong cost competitiveness.

Besides, the deregulation process in the domestic gas market has been slower, while milder-than-expected competition does not seem to be intensifying rapidly, it said.

Teikoku Oil plans to increase its overall production both in Japan and abroad to more than 100,000 barrels of oil per day in 2006 from the current 45,000 barrels The company aims to grow further through expanding its overseas business but the risk along with the expansion seems to be limited due to its conservative investment policy in terms of regions, the rating agency said.

Although its total debt is likely to increase for the next two to three years as Teikoku Oil plans to make a large investment in its pipeline network in Japan and in oil development in Ecuador, the debt is likely to start to decrease after the investment in pipelines is completed in 2007, it said.

S&P also said Teikoku Oil will keep its ratio of funds from operations to the total debt at 40 to 50 percent or higher, and that the total debt will not exceed 20 percent of capital even at its peak.

-----

To see more of Kyodo News International, go to http://www.kyodonews.com

Copyright (c) 2005, Kyodo News International, Tokyo

Distributed by Knight Ridder/Tribune Business News.

For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com.

1601,

Source: Kyodo News International, Tokyo

More News in this Category