TEXT-S&P revises PDVSA outlook to stable from negative

<a href=reuters.com>Reuters Wed April 16, 2003 04:48 PM ET (The following statement was released by the rating agency)

NEW YORK, April 16 - Standard & Poor's Ratings Services said today that it affirmed its 'CCC+' corporate credit rating on Venezuelan state oil company Petroleos de Venezuela S.A. (PDVSA) and revised its outlook on the company to stable from negative.

"The outlook revision follows a similar change to our outlook for the ratings on the Bolivarian Republic of Venezuela, which reflects improving liquidity for the country as a result of recovering oil production against a backdrop of continuing, albeit diminished, economic pressures, and political turmoil. Future ratings changes on PDVSA will be linked to those on Venezuela," said Standard & Poor's credit analyst Bruce Schwartz.

As Venezuela recovers from the political and economic strife that has affected the company during the past year, Standard & Poor's expects that the government will continue to use its authority to exploit PDVSA's financial resources to effectively consolidate the debt management of the republic with PDVSA. This interrelationship has the potential to diminish PDVSA's access to international capital markets and trade credit on favorable terms. Mechanisms to extract cash from PDVSA include royalties, taxes, dividends, use of PDVSA's cash balances to support the bolivar (the Venezuelan currency), and the slow payment on government receivables held by PDVSA.

Standard & Poor's also said that although PDVSA has increased production to between 2.4 million barrels per day and 3.1 million barrels per day from less than 500,000 barrels per day at the peak of the strike, which is much more rapid than had been expected, questions remain about the long-term impact of the strike on PDVSA's production capacity.

Furthermore, Standard & Poor's is concerned about the strike's impact on PDVSA's ability to finance both sustaining capital expenditures and growth initiatives. 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.