The rating on Hong Kong-based CITIC Resources Holdings Ltd. (CRH) reflects the company's exposure to cyclical businesses with limited synergy, its vulnerability to volatility in commodity prices, and its highly leveraged capital structure. These weaknesses are partly offset by the support CRH derives from being part of CITIC Group (BBB-/Watch Pos/A-3), a diversified conglomerate wholly owned by the Chinese government (A+/Stable-A-1+), and the relatively long-life reserves of its oil field in Kazakhstan. As we expected, CRH's profitability and cash flow generation were very weak for the first half of 2009. The decline is attributable to the significant drop in crude oil prices compared with the same period last year and the high cost structure of its oil fields. Oil production
