S&P: Explorer Pipeline on watch

Standard & Poor's said it placed its A-2 short-term commercial paper rating on Explorer Pipeline Co. on Creditwatch with negative implications.

The Creditwatch listing reflects its concerns about a 7% reduction in Explorer's revenues and 19% decline in EBITDA from Sept. 2007 due to sharply lower demand from high gasoline and jet fuel prices and service interruptions caused by Hurricane Ike in Sept., the agency said.

The Sept. 2007 performance did not include the acquisition of the Eagle Pipeline, S&P noted, adding that the lower cash flow pressures the company's compliance with debt to EBITDA covenants, which it believes have become tight.

Due to weakening economic conditions, Explorer's throughput may remain somewhat weaker than normal for the next several quarters, S&P said, noting that the rating on Explorer reflects its strong business profile and intermediate financial profile as a common carrier pipeline of petroleum products including gasoline, jet fuel, diesel, and kerosene from the Gulf Coast to Midwestern U.S. markets.

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