Standard & Poor's Ratings Services has affirmed the BB corporate credit rating on Houston-based Vulcan Energy Corp. and the BBB- corporate credit rating on midstream MLP Plains All American LP. The outlook is stable for both entities.

            Vulcan was formerly Plains Resources, which spun off E&P subsidiary Plains Exploration & Production Co., Houston, (NYSE: PXP) in 2002. Vulcan has a 10% stake in Plains All American and owns 54% of the general partner.

            S&P has also affirmed the BB rating on Vulcan's secured term loan due 2011. The recovery rating remains 4, and S&P affirmed the BBB- rating on Plains' senior unsecured notes.

            This comes after news that Occidental Petroleum Corp., Los Angeles, (NYSE: OXY) plans to acquired a 10% equity interest of the general-partner interest in Plains All American. S&P expects that Vulcan’s GP stake could fall to 50.1%, provided that the Vulcan lenders agree to allow the sale.

S&P credit analyst David Lundberg says, “The rating on Vulcan reflects its complete reliance on upstream distributions from Plains All American to support its debt service and administrative expenses, as well as the potential volatility associated with these distributions.”

Plains’ distributions have grown steadily, but a disruption in these payments could materially impair Vulcan's ability to service its debt. In particular, incentive distribution rights represent more than half of Vulcan's current EBITDA and would be disproportionately affected if Plains needs to reduce distributions. Vulcan's term loan is non-recourse to Plains.

The rating on Plains reflects a satisfactory business-risk profile, with stable cash-flow provided by the company's network of pipelines and terminals, and a moderately leveraged financial risk profile, S&P reports. Partially offsetting these factors are the risks presented by Plains’ volatile marketing segment, the company's acquisitive growth strategy, and the potential strain that volatile crude oil prices could place on the company's liquidity in a stressed scenario. SJP