S&P cuts Petrozuata Finance Inc.'s bonds

www.forbes.com Reuters, 01.13.03, 12:32 PM ET

(The following statement was released by the ratings agency) NEW YORK, Jan 13 - Standard & Poor's Ratings Services today lowered its rating on Petrozuata Finance Inc.'s $1 billion bonds to 'B' from 'B+', due to a continuing shutdown of operations that result from continuing strike action in Venezuela's oil and gas sector. The rating remains on CreditWatch with negative implications where it was placed on Dec 10, 2002. The bonds are guaranteed by Petrolera Zuata, Petrozuata C.A.

Petrozuata is a heavy oil upgrading project located in Venezuela that is owned by Conoco Orinoco (50.1%), a subsidiary of ConocoPhillips (A-/Stable/A-2), and PDVSA Petroleo Y Gas (49.9%), a subsidiary of Petroleos de Venezuela S.A. (PDVSA: CCC+/Negative/--).

Petrozuata shut down production and processing operations in December 2002 due to a lack of natural gas and hydrogen supplies at the Jose upgrader complex. PDVSA supplies natural gas to Petrozuata and supplies feedstocks to third parties who produce and supply hydrogen to Petrozuata. These developments result from a continuing national strike that includes some management and employees of PDVSA against the Chavez government. The strike action has led to a near shutdown in domestic production and refining, a large drop in exports of crude oil and refined products, and growing civil unrest between the government and opposition groups.

Standard & Poor's expects to resolve the CreditWatch as developments warrant. The rating could fall further if operations are not restored in the first quarter, an adverse government intervention into the sector or the project occurs, or the creditworthiness of the sovereign further deteriorates.

Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Fixed Income in the left navigation bar, select Credit Ratings Actions.