TEXT-S&P affirms Petrozuata Finance
Reuters, 05.05.03, 4:34 PM ET
(The following statement was released by the rating agency) NEW YORK, Standard & Poor's Ratings Services today removed its 'B' rating on Petrozuata Finance Inc.'s $1 billion bonds from CreditWatch, where it was placed with negative implications on Dec. 10, 2002. Standard & Poor's affirmed the 'B' rating on the bonds, which are guaranteed by Petrolera Zuata, Petrozuata C.A (Petrozuata). The outlook is stable.
Petrozuata is a heavy oil production and upgrading project located in Venezuela that is owned by Conoco Venezuela Holding (50.1%), a subsidiary of ConocoPhillips (A-/Stable/A-2), and PDVSA Petroleo (49.9%), a subsidiary of Petroleos de Venezuela S.A. (PDVSA: CCC+/Stable/--).
"The removal of the rating from CreditWatch is due mainly to the project's ability to restart and stabilize operations and to make offshore debt payments without exposure to foreign exchange controls," said credit analyst Terry Pratt. "The removal is further supported by the outlook for the Bolivarian Republic of Venezuela and PDVSA, which was revised to stable on April 16, 2003, by Standard & Poor's because of the government's improving liquidity and a reduction, albeit limited, in economic and political pressures."
The Petrozuata project restarted upgrader operations in early March 2003 following the redelivery of natural gas and hydrogen feedstocks by PDVSA Gas and third parties supplied by PDVSA Gas. Petrozuata reports that its current operations are in line with year 2003 business forecasts.
Continued operation of the upgrader relies on continued operations of PDVSA. PDVSA has improved oil production levels to about 3.1 million barrels per day despite the dismissal of about 40% of its employees in response to a general strike. However, PDVSA operations, and thus potentially feedstock supplies to Petrozuata, remain exposed to renewed disruptions caused by continuing political and social tensions and uncertain capital available for investment.
The stable outlook reflects Petrozuata's current production above or at pro forma rates and general expectations that the project will continue to receive sufficient feedstocks from PDVSA Gas to support production and will not be subject to foreign exchange controls. The outlook could change to negative if the project's ability to maintain steady production becomes questionable, or if the credit outlook for the sovereign or PDVSA worsens. The outlook could be revised to positive if the outlook on PDSVA and the government improves.
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).