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Essay on Petrolera Zuata, Petrozuata California
Petrozuata: An Introduction
Petrozuata is a proposed $2.5 billion oil-field development project in Venezuela. The case is set in 1997 as the project sponsors, Conoco and PDVSA (Venezuela's national oil company), are planning to meet with various development agencies and rating agencies regarding the proposed financial structure. The sponsors hope to raise a portion of the $1.5 billion debt in the capital markets, which will require an investment-grade rating. The key questions are whether the project will achieve an investment-grade rating and, if not, how to finance the project.
Standard & Poor's Ratings Services removed Monday its 'B' rating on Petrozuata Finance Inc.'s $1 billion bonds from CreditWatch, where it was placed with negative implications on 2002. Standard & Poor's affirmed the 'B' rating on the bonds, which are guaranteed by Petrolera Zuata, Petrozuata C.A (Petrozuata). The removal of the rating from CreditWatch is due mainly to the project's ability to restart and stabilize operations and to make offshore debt payments without exposure to foreign exchange controls. The removal is further supported by the outlook for the Bolivarian Republic of Venezuela and PDVSA, which was revised to stable on April 16, 2003, by Standard & Poor's due to the government's improving liquidity and a reduction, albeit limited, in economic and political pressures.
The Petrozuata project restarted upgrader operations in early March 2003 following the redelivery of natural gas and hydrogen feedstocks by PDVSA Gas and third parties supplied by PDVSA Gas. Petrozuata reports that its current operations are in line with year 2003 business forecasts. Continued operation of the upgrader relies on continued operations of PDVSA. PDVSA has improved oil production levels to about 3.1 million barrels per day despite the dismissal of about 40% of its employees in response to a general strike. However, PDVSA operations, and thus potentially feedstock supplies to Petrozuata, remain exposed to renewed disruptions caused by continuing political and social tensions and uncertain capital available for investment....
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