Fitch places Venezuela's CITGO on negative rating watch

ANKARA

Fitch Ratings said Monday it placed CITGO, the U.S. subsidiary of Venezuelan state-owned oil company PDVSA, on rating watch negative due to increased refinancing risks in light of U.S. sanctions.

The global rating agency said in a statement that sanctions could mean the company would need to find liquidity alternatives.

The U.S. sanctions against Venezuela halted U.S. refiners purchasing crude oil purchases from PDVSA and CITGO unless payments are made outside of the President Nicolas Maduro regime.

"As a result, Venezuelan crude imports have dried up, forcing CITGO to procure alternate supplies," the statement said.

Fitch said CITGO's crude supply agreement allowed for up to 310,000 barrels per day of crude sales from Venezuela, but since PDVSA's oil production has been falling in recent years, purchases of Venezuelan crude have also been in decline.

"While CITGO has a good track record of buying from third party suppliers on economic terms, there is additional execution risk associated with finding new long term supplies," Fitch said.

The agency noted that 23 percent of CITGO's crude purchases were from PDVSA as of the third quarter of 2018.

Fitch warned that a negative rating action could be taken if CITGO fails to economically replace lost PDVSA crude oil volumes.

The agency said it expects to resolve CITGO's rating watch by mid-summer, but this could be extended if the company has a credible plan to refinance or find alternative sources of liquidity.