Standard & Poor’s (S&P) raised the credit rating on El Paso Corp. and its subsidiaries to “B” from “B-” and on El Paso Energy Credit Corp. to “B+” from “B” which “recognizes the considerable progress that the company has made in reducing exposure to unregulated operations and improving liquidity.” The company’s outlook is positive.

“Proceeds from asset sales and successful issuance of $750 million of convertible preferred stock in April put the company in a much-improved position to meet its challenging near-term maturities, although refinancing risk remains a material concern,” said S&P. Analysts noted that the exploration and production (E&P) business, “where serious underperformance is a continuing cause for concern,” has stabilized somewhat as production has leveled out.

“Continued progress toward improving the financial profile and an improvement in E&P operations would result in another ratings upgrade,” said S&P credit analyst Ben Tsocanos.

S&P noted that the current ratings on El Paso reflect a business profile still burdened by “failed unregulated power ventures and the challenges of rehabilitating poorly performing E&P operations, coupled with a highly overleveraged capital structure and considerable debt maturities through 2007. A history of accounting and governance issues, including large reserve write-downs, weaknesses in internal controls, and a Securities and Exchange Commission investigation present a further drag on ratings.”

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