Fitch: Credit Quality of Emerging Markets Oil & Gas Sector Correlated to Sovereign's Performance

NEW YORK--(Business Wire)--
In a special report issued today, Fitch Ratings reports that national oil
companies (NOC) in the emerging markets (EM) oil and gas industry are
experiencing a significant decline in cash flow generation driven mainly by a
lower price environment at the time they need to fund aggressive capital
investment plans during a tight credit market and constrained government
budgets. Fitch anticipates most negative rating actions for the EM oil and gas
companies in 2009 to be triggered by sovereign downgrades, since one of the key
risks for the stability of their ratings is the impact of the global recession
on the EM sovereigns.

"Emerging markets oil and gas companies' credit quality is closely correlated
with those of the sovereigns and how these countries have been impacted by the
global economic downturn is very indicative of how an oil and gas company will
perform," said Jose Luis Villanueva, Director at Fitch Ratings. "Governments
often control the operations of the oil and gas companies, dictate the energy
policies that regulate them, and set national price policies. National oil
companies generate significant revenues for sovereigns and hard currency that
helps to balance external accounts."

Fitch expects NOCs to limit the deterioration in their credit metrics by
revising down capex budgets and to access alternative sources of financing to
meet liquidity needs. These include funds from China, government banks, and
international oil companies (IOCs). NOCs in EM have already secured about USD45
billion from China in return for access to their hydrocarbons. Government banks
in Brazil and Russia have committed to funding a significant portion of their
respective NOCs refinancing needs. State-owned banks and China are expected to
fund approximately USD60 billion to sector companies rated by Fitch,
representing 55% of their USD108 billion funding needs in 2009.

For more details on key rating drivers, capex trends, sources of financing in
2009, operating and financial metrics for NOCs in Brazil, China, Colombia,
Kazakhstan, Malaysia, Mexico, Russia, Thailand and Venezuela, please see the
special report titled 'Emerging Markets Oil and Gas: State-Owned Banks and China
Step Up to Fund Sector,' available on the Fitch Ratings web site, under
'Corporates' at www.fitchratings.com.

Fitch's rating definitions and the terms of use of such ratings are available on
the agency's public site, www.fitchratings.com. Published ratings, criteria and
methodologies are available from this site, at all times. Fitch's code of
conduct, confidentiality, conflicts of interest, affiliate firewall, compliance
and other relevant policies and procedures are also available from the 'Code of
Conduct' section of this site.

Fitch Ratings
Jose Luis Villanueva, 212-908-9158 (New York)
Simon Wong, 6796-7235 (Singapore)
Jeffrey Woodruff, 207 682-7322 (London)
Cindy Stoller, 212-908-0526 (Media Relations, New York)
cindy.stoller@fitchratings.com

Copyright Business Wire 2009