The Wall Street Journal: Moody's Cuts Deer Park Refining L-T Rating To A2: “The long-term rating downgrade primarily reflects the impact of Moody's downgrade in May 2004 of Deer Park's 50% owner, Shell Oil Company” (ShellNews.net)

DOW JONES NEWSWIRES

July 30, 2004 5:48 p.m.

Posted 31 July 04

The following is a press release from Moody's Investors Service:

New York, July 30, 2004 -- Moody's Investors Service downgraded Deer Park Refining L.P.'s (Deer Park) long-term debt to A2 from A1 and confirmed the company's Prime-1 commercial paper rating. The rating outlook is stable. Deer Park is a refinery project joint-venture owned 50% by Shell Oil Company and 50% by P.M.I. Norteamerica, a subsidiary of Petroleo Mexicano (PEMEX, rated Baa1 foreign currency). It is financed on a non-recourse basis to its owners. The long-term rating downgrade primarily reflects the impact of Moody's downgrade in May 2004 of Deer Park's 50% owner, Shell Oil Company to Aa2 from Aa1.

The Deer Park rating action is tied to the resolution of the rating review of Shell Oil, whose Issuer Rating was today confirmed at Aa2 with a stable outlook, and to the review of Shell Oil's ultimate owners, the Royal Dutch/Shell Group, whose guaranteed subsidiary ratings were confirmed at Aa1 with a negative outlook. The downgrade of Deer Park's rating to A2 from A1 reflects the marginally weaker credit quality of the Shell Oil support in the wake of its downgrade earlier in the year. Deer Park benefits from considerable rating uplift above its fundamental credit quality as a standalone project, based in large part on its significance to and operational integration as a refining investment within Shell Oil Company's downstream portfolio, as well as on significant liquidity and pro-rata capital support provided to the project by Shell Oil. These supports include Shell 's pro-rata equity funding of the $310 million Maya II upgrading project, which was completed in 2001; Shell Oil offtake purchase obligations; and liquidity backstops to the project.

Moody's notes that the stable rating outlook and Deer Park's Prime-1 commercial paper rating and liquidity are bolstered by recent strong operating cash flows and by refinancings that have paid down short-term debt. In addition, the partners have recently entered into an agreement to forgo distributions and build cash to enhance the partnership's flexibility in meeting substantial debt maturities in the next few years. Deer Park is also a strategic investment for P.M.I, as the refinery provides an assured outlet under a long-term contract for Mayan crude produced by PEMEX.

Deer Park Refining Limited Partnership is a 340,000 barrel per day heavy coking refinery project located at Deer Park, Texas.