Caracas, Friday, October 18,2013

MEXICO CITY – Standard & Poor’s Ratings Services affirmed its ‘B’ foreign and local currency corporate credit ratings on Petroleos de Venezuela S.A. (PDVSA).

At the same time, the agency affirmed its ‘B’ senior unsecured debt rating on the company. The outlook remains negative. The affirmation follows S&P’s regular annual review.

In addition, the agency revised its stand-alone credit profile (SACP) on PDVSA to ‘b’ from ‘b+’.

“The downward revision of PDVSA’s SACP reflects the rising business risk for PDVSA in light of heavy government involvement in the energy sector which affects the company’s day-to-day operations amid increased country risk to which the company is exposed following Venezuela’s downgrade,” said Standard & Poor’s credit analyst Fabiola Ortiz.

S&P believes that PDVSA’s commitment to supply 450 million barrels per day (mbpd) to cover the government’s debt, coupled with a highly taxed industry, underscores the government’s heavy involvement in the sector. As a result, the agency believes that the company’s SACP is highly intertwined with the sovereign’s credit quality.

The ratings affirmation reflects S&P’s criteria on government-related entities (GREs) and its view of an “almost certain” likelihood of government extraordinary support to PDVSA under financial distress scenarios, as well as extraordinary financial burden under sovereign distress scenario.

This assessment is based on PDVSA’s “critical” role as it contributes about 50% of Venezuela’s revenues and 90% of its exports, and plays a key role in meeting the sovereign’s political and economic objectives and its “integral” link with the government, given its full and stable ownership of the company and high involvement in the day-to-day operations.