S&P affirms Suncor, lifts Petro-Canada

Standard & Poor's said it affirmed the BBB+ long-term corporate credit and senior unsecured debt ratings on Suncor Energy Inc. and raised the corporate credit and senior unsecured ratings on Petro-Canada to BBB+ from BBB on the expectation that the merger between the two companies closes July 31.

The outlook is stable.

"A key benefit accruing to the credit profile of postmerger Suncor is the addition of Petro-Canada's mature assets, notably the Canadian East Coast and the North Sea, which we expect will generate substantial free cash flow and significantly improve Suncor's capacity to fund additional oil sands projects without the same level of external financing it has historically relied on," S&P analyst Jamie Koutsoukis said in a statement.

"Furthermore, Petro-Canada's large downstream operations and greater geographic diversification, compared with those of Suncor, should strengthen the merged entity's business risk profile," Koutsoukis added.

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