Standard & Poor’s Ratings Services (S&P) on Tuesday raised the long-term corporate credit rating on pipeline giant El Paso Corp. and its subsidiaries to “B+” from “B” following the progress the company has made to refocus its businesses. Its outlook is “positive.”
In May, the Houston-based company’s reported 1Q2006 net income tripled to $356 million (49 cents/share) from $106 million (17 cents) in 1Q2005. It also reported about $17.1 billion of debt outstanding as of March 31 (see Daily GPI, May 8).
“The upgrades recognize the considerable progress that the company has made refocusing on the core pipeline and oil and gas exploration and production operations and stabilizing its financial position,” said credit analyst Ben Tsocanos. The analyst said El Paso’s “ventures into diverse unregulated business, which entailed significant financial leveraging and market risk, now represent a minimal component” of its profile.
According to Tsocanos, the upgrade also “incorporates our assessment that El Paso has firmed up its once precarious liquidity position ahead of still sizable near-term maturities, though refinancing risk remains.”
The positive outlook indicates that additional near-term ratings improvement is possible, contingent on further improvement in El Paso’s financial profile, demonstrated operational progress in the exploration and production business, and completion of its exit from power generation and marketing and trading.
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