S&P cuts Amerada Hess to BBB-

Standard & Poor's said it lowered its corporate credit and senior unsecured debt ratings on Amerada Hess Corp. to BBB- from BBB.

The outlook remains negative.

S&P said the downgrade reflects heightened concerns about the company's ability to meet S&P's expectations for production through 2006, in particular, contributions from Northern Block G in Equatorial Guinea. Amerada Hess' reliance on a large number of developments coming onstream, on time, many of which are dependent on factors outside the company's control (Northern Block G, the Joint Development Area of Thailand/Malaysia, the Llano development in the Gulf of Mexico), to meet optimistic growth targets highlights a business-risk profile that is at the outer limits of investment grade.

The agency added that the low investment-grade ratings on Amerada Hess reflect its geographically diverse oil and natural gas business; a sizable, crude oil-refining joint venture; and a retail marketing business in the eastern United States.

Partly offsetting these strengths are the volatile, capital-intensive nature of Amerada Hess' segments, increasing capital investment in politically challenging locales, moderate debt leverage, a high-cost structure in its exploration and production operations, and a very short reserve life that necessitates operational consistency to insure cost-competitive reserve replacement.

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