(Source: Business Wire)
Fitch Ratings has assigned a 'B+/RR4' rating to Petroleos de Venezuela S.A.'s (PDVSA) proposed USD3 billion zero coupon notes due in 2011. These notes will be registered at Euroclear and/or Clearstream. Proceeds from the issuance are expected to be used to fund capital expenditures and for other general corporate purposes. Fitch also has the following ratings on PDVSA:
--Foreign currency Issuer Default Rating (IDR) 'B+';
--Local currency IDR 'B+';
--USD3 billion outstanding senior notes (due 2017) 'B+/RR4';
--USD3.5 billion outstanding senior notes (due 2027) 'B+/RR4';
--USD1.5 billion outstanding senior notes (due 2037) 'B+/RR4';
--Long-term National Scale rating of 'AAA(ven)'.
The Rating Outlook is Stable.
PDVSA's credit quality is inextricably linked to that of the government of Venezuela. It is a state-owned entity, whose royalties and tax payments represent more than 50% of the government's revenues, and it is of strategic importance to the economic and social policies of the country. In the past two years, the government has used PDVSA's balance sheet to nationalize electricity companies, as well as to acquire industrial companies. The government also took the additional step during 2008 of changing PDVSA's charter and mission statement to allow it to participate in any industry that could contribute to the social development of the country, including health care, education and agriculture.
PDVSA continues to be an important player in global energy. A strong balance sheet in line with worldwide competitors, sizeable proven hydrocarbon reserves, strategic interests in international downstream assets, private participation in upstream operations and geographic proximity to the North American market provide important competitive advantages that are difficult to undermine. PDVSA's nature as a state-owned entity, combined with increased government control over business strategies and internal resources, underscores the close link between the company's credit profile and that of the sovereign.
Venezuela's reported oil production has remained relatively stable during the past four years at approximately 3.25 million barrels per day (MMbpd) despite a high level of upstream investments. From 2002 to 2005, total capital expenditures at PDVSA averaged USD3.1 billion per year. In 2006, 2007 and 2008, they climbed to USD7.2 billion, USD12.8 billion and USD18.4 billion, respectively. Higher oil prices have also resulted in much higher contributions by PDVSA to the government in the form of royalties, taxes, dividends, and transfers to social and development funds.
