Moody's ups Pan American Energy

Moody's Investors Service said it assigned a Ba2 global local currency issuer rating to Pan American Energy LLC and upgraded the company's foreign currency issuer rating to B1 from Caa1.

The outlook for Pan American Energy's local currency and foreign currency ratings is stable.

Moody's said Pan American Energy's Ba2 global local currency rating is supported by (1) the company's substantial oil and gas reserves and strong market share in Argentina, (2) its position as a net exporter of oil and gas, (3) its fairly long reserve life on proven developed reserves and favorable oil production growth outlook, (4) its efficient cost structure, (5) the benefits derived from its relationship with its majority owner, BP plc (rated Aa1), and (6) its conservative financial leverage.

However, the Ba2 rating also considers (1) Pan American Energy's geographic concentration, (2) its small contribution to BP's worldwide hydrocarbon reserves and production, (3) political risk and economic weakness in Argentina and in Bolivia, with negative implications for natural gas reserve replacement, (4) the company's high proportion of proved undeveloped reserves, (5) the potential for increases in its unit full-cycle costs, and (6) the company's significant near-term debt maturities.

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