S&P ups Petrozuata bonds to B+

Standard & Poor's said it raised its rating on Petrozuata Finance Inc.'s $987.2 million in bonds due between 2009 and 2022 to B+ from B. The outlook is stable.

S&P said the B+ rating reflects its belief that Petrozuata is wholly located in Venezuela, a country that remains highly polarized politically and economically, which exposes the project to the risk of government intervention that could negatively affect operations and financial performance, operation of the upgrader relies on feedstocks from third parties and PDVSA, the project is exposed to commodity price risk because it does not have any fixed-price contracts for the sale of its syncrude production., Conoco's obligation to purchase the output can be suspended when either of the designated refineries shut down for maintenance or when force major events occur and senior lenders may be unable to enforce fixed-asset collateral security in Venezuela.

Offsetting these risks are the fact that Petrozuata has strong break-even economics, operations continue to be good, with average heavy oil and syncrude production rates that are above pro forma levels, capital programs in progress should lead to improved performance and the project is not exposed to marketing risk because ConocoPhillips and PDVSA have agreed to lift all syncrude production in the absence of third-party sales through a contract that expires well beyond the debt tenor, according to S&P.

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