Moody’s downgrades Deer Park after Pemex acquires Houston refinery

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MEXICO CITY, May 28, 2021, (Reuters).- Moody’s Investors Service has cut the rating of Deer Park Refining Limited Partnership to “Baa3” from “Baa2”, the rating agency said late Thursday, May 27, while placing the stock on review for a further downgrade.

The decision comes after Shell Oil Co, a subsidiary of Royal Dutch Shell Plc, agreed to sell its controlling interest in Deer Park Refining to partner Mexican state oil company Petroleos Mexicanos, or Pemex.

This makes Deer Park Refining, a Texas-based facility, the first foreign refinery that Pemex will own solely in its history. The Mexican company said it plans to control and run the refinery after the deal is settled by late this year.

Shell is shrinking its refining and chemicals portfolio as part of a broader shift by oil majors to reduce hydrocarbon emissions and shift to lower-carbon fuels.

“The review for downgrade of the Baa3 ratings further reflects Moody’s expectation that following the sale, Deer Park ratings will be driven predominantly by its standalone credit dynamics and the much-weaker credit profile of Pemex,” the agency said in a statement.

“The Baa3 rating still benefits from a multi-notch rating uplift, which is primarily linked to Shell and also factors in several credit-enhancing arrangements, including shareholder loans and liquidity support arrangements, committed by both Shell and Pemex.”

Source: Reuters