Fitch Ratings Assigns 'A-' Rating to ConocoPhillips.Business Editors CHICAGO--(BUSINESS WIRE)--Sept. 3, 2002 Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has assigned ConocoPhillips a senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. rating of 'A-' following the completion of the merger between Conoco Inc. (Conoco) and Phillips Petroleum Company Phillips Petroleum Company was founded in 1917 by L.E. Phillips and Frank Phillips, of Bartlesville, Oklahoma. Their younger brother, Waite Phillips was the benefactor of Philmont Scout Ranch. Phillips Petroleum was headquartered in Bartlesville, Oklahoma. (Phillips). As a result, Fitch has upgraded the Conoco Inc. and Conoco Canada senior unsecured debt to 'A-' from 'BBB+' and affirmed the Phillips Petroleum Company senior unsecured debt at 'A-'. All existing senior unsecured debt of Conoco and Phillips as well as the companies' unsecured credit facilities credit facilities npl → facilidades fpl de crédito credit facilities npl → facilités fpl de paiement credit facilities and any new ConocoPhillips unsecured debt will rank equally due to guarantees, cross guarantees, etc. In addition, commercial paper programs for the newly formed company have been affirmed at 'F2' and the Phillips trust preferred securities has been affirmed at 'BBB+'. The rating actions affect approximately $20 billion of debt. Fitch has removed the Rating Watch for both companies and the Rating Outlook for ConocoPhillips is Stable. On August 30, 2002, Conoco and Phillips completed their merger to become ConocoPhillips, the sixth largest publicly owned, vertically integrated oil and gas company in the world in terms of reserves and production. Proved reserves proved reserves The quantity of minerals expected to be recoverable under current economic and operating conditions. The amount of proved reserves is important in valuing the stock of a company with significant holdings in natural resources. are approximately 9 billion barrels of oil equivalent (boe) and production is almost 1.7 million boe per day. Globally, the company ranks fifth in refining capacity (2.6 million barrels per day Barrels per day (abbreviated BPD, bbl/d, bpd, bd or b/d) is a measurement used to describe the amount of crude oil (measured in barrels) produced or consumed by an entity in one day. ) and markets through nearly 20,000 retail sites worldwide. The merger creates opportunities to capture synergies and reduce its cost structure through portfolio optimization, headcount reductions, etc. Currently, the company has approximately $20 billion of balance sheet debt and another $6 billion in off-balance sheet debt (operating leases, synthetic leases, accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying programs, etc.). Over the past three quarters, debt levels for both Conoco and Phillips have increased incrementally due to a variety of factors. Fitch anticipates that the present debt levels will decrease somewhat over time through the use of free cash flow and potential asset divestitures. Going forward, Fitch expects that the new company will attain coverages, as measured by EBITDAX/cash interest, of over 7.0 times (x) in a 'mid-cycle' pricing ($20/bbl (NYMEX See New York Mercantile Exchange. NYMEX See New York Mercantile Exchange (NYM). ) and $2.75/Mcf (Henry Hub)) and margin environment. In such an environment, debt/EBITDAX would be slightly over 2.0x and adjusted debt/EBITDAX would be between 2.5x and 3.0x. Ultimately, Fitch believes that the ratings of ConocoPhillips should migrate upwards over time; however, the time frame for any such movements is not certain. |
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