S&P downgrades OGX

Standard & Poor's said it lowered the corporate credit rating on OGX Petroleo e Gas Participacoes SA to B- from B.

The outlook is negative.

The downgrade is primarily based on the company's lower-than-expected operating performance, particularly in terms of production levels and productivity per well, S&P said.

Ramping up production continues to be OGX's main risk, the agency said, and production delays and higher costs should keep credit metrics weak for the next two years.

Although the company does not have any significant debt maturity until 2018 when the $2.6 billion bond is due, S&P said it believes that OGX will consume almost all of its $1.6 billion in cash to fund capital expenditures and interest payments during 2013.

As a result, the company would need additional sources of cash to reduce expected cash pressures in 2014 and maintain current capital expenditures, the agency said.

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