Moody's cuts Suncor Energy

Moody's Investors Service said it lowered Suncor Energy Inc.'s senior unsecured rating to Baa2 from Baa1. The rated debt of Petro-Canada Ltd. that has been assumed by Suncor on a pari passu basis with its existing senior unsecured debt is also rated Baa2.

The Baa2 rating of the $400 million 5% notes due 2014 issued by PC Financial Partnership was affirmed. These notes have not been assumed by Suncor but now benefit from guarantees from Suncor Energy Inc. and Suncor Energy Oil Sands LP.

This concludes the review of Suncor and Petro-Canada that was prompted by their March 2009 announcement that they had agreed to amalgamate. The outlook is stable.

The agency said the lowering of Suncor's senior unsecured rating reflects the high debt level of the combined company, significant anticipated capital expenditure and development of oil sands assets and the operational and execution risks of integrating Petro-Canada's predominately conventional assets, of a type and in geographies in which Suncor is inexperienced.

Suncor's Baa2 rating is supported by its significant oil sands and conventional production platform, vast and long-lived oil sands reserves, which have low maintenance capex and reinvestment risks compared to conventional E&P production, and the company's larger downstream asset footprint, Moody's said.

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