In addition, Fitch affirms DEFS' 'F2' short-term debt rating which applies to its commercial paper program. The Rating Outlook is Stable. The rating action affects $1.85 billion of outstanding notes at DEFS.
DEFS is one of the leading gatherers of natural gas and is one of the largest producers of natural gas liquids (NGLs) in North America. DEFS was formed on March 31, 2000, through the combination of the midstream gas businesses of Phillips Petroleum Company (now ConocoPhillips (COP)) and Duke Energy Corp. (DUK). Currently, COP (IDR 'A-'; Rating Outlook Positive) and DUK subsidiary Duke Capital, LLC (IDR 'BBB-'; Rating Watch Positive) each own a 50% interest in DEFS. DUK plans to spin off its natural gas operations, including its interest in DEFS, on January 1, 2007, in a transaction that is expected to be credit neutral for Duke Capital and DEFS.
DEFS' rating and stable rating outlook reflect the following characteristics: a conservative capital structure and generally strong current and projected credit measures; significant scale and scope of operations and geographic diversity of assets; supportive corporate sponsors in DUK and COP; and a highly discretionary capital spending program. Also recognized in the rating is DEFS' ongoing financial exposure to fluctuations in commodity prices.
