Return of Petroperú to Talara more than covers the external debt

A recent investigation by La República revealed that the EBITDA (earnings before interest, taxes, depreciation and amortization) that Petroperú would generate annually with its income, partial or total, to lots I, VI, Z-2B and X of Talara, would exceed US$135 million on deposits that represent a going concern with low risk.

In addition to a reversal (that is, that the proven hydrocarbon reserves of these lots return to the State) that has been classified as “necessary” by the Ministry of Energy and Mines (Minem) and Perupetro, due to the meager results in terms of exploration and replacement of reserves after 3 decades of privatization, the following question falls ripe: what could Petroperú do to stabilize its situation once these new incomes have been obtained.

capital debts

At this moment, Petroperú has US$3,000 million in bonds, which are subject to an average interest rate of around 5%, that is, around US$160 million that the state company must honor each year (see infographic). It must be considered that the quality of a bond is precisely that, granting the payment of an interest rate during the life of the bond and the repayment of the total capital at its maturity.

Petroperú is also currently paying around US$187 million per year in interest and amortization of the loan from the Spanish Export Credit Agency (CESCE), an amount that will gradually decrease. Therefore, the annual debt service is around US$350 million, not including short-term debt.

In a recent column by the energy specialist Humberto Campodónico, it is mentioned that the EBITDA of Block X alone -according to an estimate made by Petroperú in the last quarter of 2022- would reach US$200 million for a company that operates it 100%. With this, the annuity of the payment of the bonds (US$160 million) could be paid, and even if it were at 50% participation (that is, US$100 million), it could cover 2 thirds.

rating in blue

With vertical integration (lots plus refining margin), the cash flow capacity increases, since the EBITDA of Block X (US$200 million) is added to the EBITDA of the refinery itself, which stands at US$470 million per year in average.

The positive EBITDA that a vertical integration would generate for Petroperú, from its entry into the Talara lots, more than covers the annual debt service and is widely accepted by risk rating agencies, although from a critical sector to the oil company only his reports echo when it comes to a downgrade.

For example, Fitch Ratings has determined that completing the phase-in of the New Talara Refinery (NRT) will drastically reduce Petroperú’s capital investment after 2023, in addition to increasing operating efficiency.

With this, the rating agency points out, the “predictable increases in the refinery’s profit margins” should translate “into stronger EBITDA revenue margins” during the state company’s rating horizon. But the batches are missing.

Petroperú and a running business waiting in Talara

A bond is a debt instrument issued by governments or corporations for the purpose of raising funds. The issuer undertakes to repay the loan at a later date and to pay periodic interest during the term of the loan. That is, first we pay the interest, at the end all the debt at once.

The other big source of positive EBITDA for Petroperú is NRT. According to the international consultancy Arthur D. Little, the complex will generate an average of US$470 million in the next 15 years (as anticipated in the May 23 edition). Others, such as S&P, set it at US$520 million per year, which makes it possible to meet the total debt of the oil company.

Data

Price. The value of a barrel of West Texas Intermediate (WTI) oil today exceeds US$70. rents. Contrary to what is thought, the Talara lots under the administration of Petroperú will pay Income Tax, with 50% going to provinces, districts and the regional government.