S&P lowers OPTI

Standard & Poor's said it lowered the long-term corporate credit rating on OPTI Canada Inc. to B- from B+, its first-lien secured rating on C$350 million revolving credit facility to B+ from BB and its second-lien secured rating on $1 billion and $750 million notes to B from BB.

The outlook is negative.

The downgrade follows a review of the company's business risk and financial risk profiles, S&P said. Ratings were removed from CreditWatch with negative implications, where they were placed Nov. 7.

"The downgrade reflects our expectation that OPTI's fully leveraged break-even cash cost will exceed C$60 per barrel, which, combined with current low oil prices, will most likely result in the company increasing its drawings under its revolver and reducing its liquidity as it progresses through 2009," S&P analyst Jamie Koutsoukis said in a statement.

Ratings reflect the company's high leverage, expected negative cash flow generation for 2009 and the Long Lake project's execution risk, the agency said.

Mitigating factors are the above-average reserve life index of its oil sands leases, an expected stable production profile and the forecast competitive netbacks and reduced natural gas fuel requirements associated with the patented OrCrude upgrading process, S&P said.

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