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S&P downgrades WY-OR Ruby natgas pipeline, says default 'virtual certainty'

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Nov 5 (Reuters) - U.S. credit rating agency S&P Global Ratings said late on Thursday it views default at Ruby Pipeline LLC "to be a virtual certainty" unless its owners, Kinder Morgan Inc and Pembina Pipeline Corp, provide support.

The threat of default was largely due to expiration of about 65% of the company's contracts in July, S&P said, noting it cut Ruby's credit rating from 'CC' from 'CCC'.

Ruby operates a natural gas pipe that moves fuel from Wyoming to Oregon. Volumes on Ruby have declined as gas output in Wyoming has dropped to 3.5 billion cubic feet per day in August from a monthly record 7.3 bcfd in December 2008, according to federal data.

Officials at Kinder Morgan had no comment on the S&P downgrade.

S&P said it was not assuming further support from Ruby's owners.

In answer to an analyst question about Ruby on the company's earnings call on Friday, Pembina VP of Capital Markets Cameron Goldade said "There's been some short-term deals there that have backfilled some of the volumes ... but not meaningful contributors to revenue."

Pembina noted in its earnings release that its Pipelines group reported lower volumes in the third quarter versus the same period a year ago due in part to lower contracted volumes on Ruby.

S&P said it expects Ruby to have a material liquidity deficit given the $475 million outstanding due April 1, 2022, relative to its liquidity sources.

S&P forecast those liquidity sources as funds from operations of about $40 million over the next six months and cash of about $52 million as of June 30.

In answer to an analyst question about Ruby on its earnings call in October, Kinder Morgan CEO Steven Kean said the company would make "an economic decision for Kinder Morgan shareholders when the debt comes due." (Reporting by Scott DiSavino; Editing by Dan Grebler)