TEXT-Petrozuata Finance has restarted operations

reuters.com Fri February 28, 2003 10:47 AM ET (The following statement was released by the ratings agency)

NEW YORK, Feb 28 - The Petrozuata Finance Inc. (B/Watch Neg/--) heavy oil production and processing project in Venezuela has restarted operations following the delivery of natural gas and hydrogen feedstocks to the upgrader. The company is operating the upgrader at 75% of capacity, and plans to return to normal production rates on March 1.

Field production is ramping up as upgrader charge rates rise. While these developments are positive, the ability of Petroleos de Venezuela S.A. and third parties to provide a stable supply of feedstocks remains questionable, given the continued political and social divisions in the country. Petrozuata plans to have 800,000 barrels of syncrude production shipped to ConocoPhillips in early March. The company's liquidity position remains adequate for the very near term, with about US$70 million in a six-month debt service reserve and about US$190 million to US$200 million in cash. This liquidity will enable Petrozuata to meet its April 2003 semiannual debt payment. To consider taking positive actions on Petrozuata's rating, Standard & Poor's will need a longer demonstration period of consistent feedstock supply and performance under recently announced foreign exchange controls. Furthermore, Standard & Poor's will need to achieve greater confidence that labor strife will not reignite in the near future.