Venezuela-owned Citgo hit with debt rating cut

www.chron.com Jan. 15, 2003, 7:53AM Copyright 2003 Houston Chronicle News Services

NEW YORK -- Citgo Petroleum Corp., a U.S. refiner owned by Venezuela's state oil company, had its debt rating cut below investment grade Tuesday by Moody's Investors Service because of a strike that's slashed oil shipments from its parent.

The rating on $700 million of Citgo senior unsecured debt was lowered to Ba2, two levels below investment grade, from Baa2 and may be cut further, Moody's said in a written statement. The reduction means Tulsa-based Citgo may have to rely on lines of credit to finance its operations, the statement said.

The action also reflects concern that Petroleos de Venezuela, Citgo's owner, may have to rely on the refiner to pay off $500 million of debt due in August, Moody's said. Citgo spokesman Kent Young declined to comment.

Citgo, which operates six U.S. refineries, including two asphalt plants, gets about half its crude supplies under long-term contracts with Petroleos de Venezuela. Its refineries are operating at normal levels as Citgo buys crude on the spot market at higher cost to replace the lost supply from Venezuela, Moody's said.

The price of crude rose Tuesday as the disruptions in Venezuela and threats of a U.S. attack on Iraq signaled that supplies may be low in coming months.

Crude oil for February delivery rose 12 cents, or 0.3 percent, to $32.37 a barrel on the New York Mercantile Exchange. Oil is up 71 percent from a year ago.

Heating oil surged 0.78 cent to close at 89.16 cents a gallon. Gasoline dropped 0.74 cent to 89.16 cents a gallon.

Natural gas for February delivery fell 14.4 cents to close at $5.107 per thousand cubic feet. Lower heating demand earlier this month helped ease concerns over frigid weather settling into much of the East Coast.

In London, the February Brent crude contract rose 41 cents, or 1.4 percent, to $30.61 a barrel.