S&P may lower Pacific Energy rating

Standard & Poor's said it placed its BBB- corporate credit rating on Pacific Energy Partners LP and its BBB- ratings on Pacific Energy's wholly owned subsidiary Pacific Energy Group LLC's senior secured debt on CreditWatch with negative implications following Pacific Energy's announcement that it has agreed to acquire the Rangeland Pipeline System from BP Canada Energy Co. for C$130 million plus about C$26 million for line fill, working capital, transaction costs, and transition capital expenditures.

Concurrently, Pacific Energy announced that a wholly owned subsidiary has entered into a letter of intent to purchase the Mid Alberta Pipeline assets, also in Alberta, from Imperial Oil Resources.

S&P said the CreditWatch listing for Pacific Energy reflects the potential for lower ratings given the increased debt levels to complete the proposed transaction, the integration and execution risks associated with the proposed transaction, as well as the uncertainty of Pacific Energy's ability to generate financial performance and maintain adequate liquidity commensurate with an investment-grade rating.

Although the acquisition should improve Pacific Energy's overall business profile, the relative size and scope of the proposed acquisitions combined with the uncertainties regarding the financial and operational implications of the transaction further heightens Standard & Poor's concerns of Pacific Energy's ability to maintain an investment-grade financial profile.

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