S&P: Petrobras Energia on watch

Standard & Poor's said it placed its B ratings on Petrobras Energia SA (PESA) on CreditWatch with negative implications, following increasing government intervention in Venezuela that might affect the company's financial profile.

S&P noted the new legal framework for hydrocarbon production in Venezuela establishes that all private concessions will now have to be operated by mixed-owned companies in which the Venezuelan Government, through its oil and gas company Petroleos de Venezuela SA (foreign currency: B+/stable).

The rating on Petrobras Energia reflects its relatively aggressive financial profile, significant need for capital expenditures to develop its large reserve base and increase production levels, high exposure to uncertain and rapidly changing economic and regulatory rules mainly in Argentina and Venezuela and the uncertainties surrounding the utility business in which the company participates, the agency said.

The rating also incorporates S&P's perception of increasing economic incentives for Petroleos Brasileiros SA to support its subsidiary.

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