COP Casino Guichard Perrachon

Casino Guichard Perrachon (AQEU:COP)
Historical Stock Chart

From Jul 2019 to Jul 2024

Moody's Investors Service has downgraded two indicators of the financial health of Citgo Petroleum Corp., the U.S. refiner owned by the Venezuelan government.

On Tuesday, Moody's announced that it has downgraded Citgo's senior-secured term loan or long-term debt obligations from investment grade to junk status. The investor service also assigned an even riskier credit rating to the company's speculative bonds because of its relationship to Venezuela's Petroleos de Venezuela SA, or PdVSA.

The move is another is another example of PdVSA's weakness in the U.S.

Earlier this month, Moody's raised its outlook for the Merey Sweeny L.P. refinery in Texas based on the possibility that ConocoPhillips (COP) would buy out PdVSA's 50% stake in their joint venture. The move edged Merey Sweeny's outlook closer to that of ConocoPhillips given its investment-grade debt versus PdVSA's riskier ratings.

In the first half of 2009, Citgo sustained a net loss of $105 million because of lower product sales and the diminishing discount on heavy oil, according to Moody's.

A few years ago, many U.S. refiners were able to boost profits by processing cheaper heavy crude compared to higher quality light, sweet blends, but with the recession, that discount has shrunk and so have refiners profits.

Citgo's results were also poor because of its social responsibility program, which provides heating oil to low income Americans-a favorite cause of Hugo Chavez, the president of Venezuela.

However, Moody's expects the Citgo's net losses to ease somewhat for the full year.

"Earnings and cash flow will remain under pressure in 2010," the report from Moody's said.

Citgo operates three refineries located in Lake Charles, La., Corpus Christi, Texas and Lemont, Ill. The plants have a combined capacity of 749,000 barrels a day.

-By Susan Daker and Naureen S. Malik, Dow Jones Newswires; (713) 547-9208; susan.daker@dowjones.com