S&P may cut Petrobras Energia

Standard & Poor's said it placed the BB foreign-currency long-term corporate credit rating on Petrobras Energia SA on CreditWatch negative.

The watch reflects a change in transfer and convertibility assessment for Argentina to B- from B+.

Ratings reflect a perception of economic incentives from Petroleo Brasileiro SA (BBB/stable/A-3) to support the issuer, given strategic importance as a key foreign subsidiary in Latin America, the agency said.

The standalone credit rating reflects high exposure to uncertain and rapidly changing economic and regulatory rules, significant need for capital expenditures and weak reserve replacement ratios, the agency noted.

Those factors are partially mitigated by an adequate level of integration between upstream and downstream operations in Argentina, and competitive production costs, S&P said.

Total debt-to-EBITDAX ratio is 1.7x for the 12 months ended Sept. 30.

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