TEXT-S&P affirms Oleoducto de Crudos Pesados

(The following statement was released by the rating agency)

Overview
-- On April 19, 2012, we lowered our corporate credit ratings on OCP's
sponsor, Repsol-YPF, to 'BBB-'from 'BBB' with a negative outlook.
-- Standard & Poor's is affirming the 'BBB' issue-level rating on
Ecuador-based oil pipeline project OCP's $900 million senior secured bank
loan.
-- The outlook is negative, following the downgrade on the ratings on
Repsol, and reflecting the possibility of a future ratings downgrade on Repsol.

Rating Action
On April 25, 2012, Standard & Poor's Ratings Services affirmed its 'BBB'
rating on the $900 million senior secured bank loan due 2018 of Ecuador-based
oil pipeline project Oleoducto de Crudos Pesados (OCP). The outlook is
negative.

Rationale

On April 19, 2012, Standard & Poor's downgraded Spain's oil and gas company,
Repsol YPF S.A. to 'BBB-'from 'BBB' after the Argentinean government's
decision to expropriate 51% of Repsol's shares in its Argentine subsidiary
YPF, S.A. The affirmation of the ratings on OCP reflects our opinion that,
despite the downgrade on Repsol, the credit quality of its sponsors will
continue to support OCP's bank loan rating at 'BBB'. We estimate that, in a
scenario in which the weakest rated performance guarantors, Repsol and
Anadarko, defaulted on the guarantee payment of their corresponding shipping
interest, the project would still be able to make debt payments fully and on
time if the other sponsors continued to comply with the shipping interest
payments. Nevertheless, the negative outlook reflects the possibility that a
downgrade of the credit rating on Repsol into the speculative grade rating
category could lead to a downgrade on OCP.

Standard & Poor's bases its 'BBB' rating on OCP's senior secured bank loan on
the creditworthiness of its several, but not joint, performance guarantors:
Repsol-YPF (BBB-/Negative/A-3), Occidental Petroleum Corp. (A/Stable/A-1),
PetroOriental Holding Ltd. (not rated), Anadarko Petroleum Corp.
(BBB-/Stable/--), and Petrobras Argentina S.A. (PASA; BB-/Negative/--;
formerly Petrobras Energia S.A.). Letters of credit from financial
institutions that we rate at or above 'BBB' support PASA and PetroOriental's
creditworthiness. Further, the transaction's contractual structure calls for
an initial shipper transportation agreement (ISTAs) between the sponsors and
OCP. Its advanced tariff payment structure--in the event of force majeure
(including expropriation of the pipeline)--isolate OCP from sovereign credit
risk. The guarantors are bound by "ship-or-pay" or advance tariff agreements,
even in a remote scenario in which the Ecuadorian government nationalizes the
pipeline or the guarantors' economic incentives decrease because of
disappointing oil exploration.

In 2001, the sponsors of OCP's parent, OCP Ltd. (not rated), entered into
15-year ship-or-pay ISTAs with OCP for capacity on the pipeline, based on
guaranteed capacity volumes (subject to distance and quality adjustments). The
performance guarantee agreements from the sponsors' respective parent
companies support the obligations of each initial shipper under its ISTA.
Under the ship-or-pay provisions of the ISTAs and the related performance
guarantee agreements, the initial shippers absorb the project risks through
payments for volumes not transported and tariff adjustments for related cost
increases, including increases in interest payments on debt service. The ISTAs
also include advance tariff payments. Shipping interests mitigate the risk of
a downgrade resulting from mergers, acquisitions, or assignment of shipping
interests and guarantees. The provision that the guarantees are only allowed
to be transferred to an entity that Standard & Poor's rates 'BBB+' or higher,
pro rata prepayment of the underlying debt, the requirement that the original
performance guarantor and guarantee remain in place, and a ratings affirmation
by Standard & Poor's stating that the transfer, in and of itself, will not
cause us to lower the rating on the senior secured debt further mitigate the
risk of a downgrade. The current rating depends primarily on the strong
contractual structure of OCP's financing. We expect the contracts and
performance guarantees that support the current rating to continue to be
honored; however, if they are not, we would expect to lower the rating on the
debt by multiple notches.

Originally, the sponsors needed this project to monetize their oil reserves
because the Trans-Ecuadorian Oil Pipeline System (SOTE) had limited capacity.
However, only two of the five initial shippers continue to transport oil
through OCP's pipeline. The pipeline's utilization rate has not met original
estimates--transportation volumes are about 30% of its capacity. Nonetheless,
the project's shippers have honored all scheduled payments to OCP under the
ISTAs, thereby stabilizing OCP's cash flow.

The shippers' creditworthiness provides an adequate cushion for the company to
meet its scheduled financial obligations under the ISTAs. Moreover, even in a
scenario in which the guarantors with the weakest-rated performance, Repsol
and Anadarko, defaulted on their shipping interest payments and on their
guarantee payment of the corresponding shipping interest, the project would
still be able to make debt payments fully and on time if the other sponsors
continued to comply with their shipping interest payments. The project's
senior secured debt is payable in semiannual installments. OCP made its last
principal and interest payment, of $43.5 million, in December 2011. The next
debt service payment is due in June 2012, for a total of $44.7 million. The
project already has these funds in reserve. To date, about 42% of the $900
million bank loan has been repaid, leaving only $551.8 million outstanding.

Liquidity
We believe the project's liquidity is satisfactory. The project has a strong
debt service coverage ratio (DSCR), which we expect to average 2.28x
throughout the remaining life of the notes. The project's only additional
source of liquidity is a debt service reserve fund for the next principal and
interest payment. As of Dec. 1, 2011, the reserve fund held $45.8 million. The
project may distribute dividends as long as the DSCR exceeds 1.20x.

Outlook
The negative outlook on OCP reflects the possibility of a ratings downgrade on
Repsol, based on the weakened credit metrics following the nationalization of
YPF. In the absence of management actions, a rating downside could arise
because we expect Repsol's adjusted FFO to debt (excluding YPF and treating
Gas Natural as an equity affiliate) to fall short of the 25%-30% range we see
as a minimum for the 'BBB-' rating (using our normalized oil and gas pricing
assumptions).

A downgrade of Repsol to below 'BBB-'could lead to a downgrade on OCP's bank
loan rating, reflecting the credit quality deterioration of one of its key
sponsors.

Although we don't believe an upgrade is probable in the short-to-medium term,
it could be possible if the creditworthiness of the guarantors with the
highest participation in the project improves significantly.

Related Criteria And Research
-- Research Update: Spain's Repsol-YPF Downgraded To 'BBB-' On
Expropriation Of YPF; Outlook Negative; April 19, 2012
-- European Legal Criteria For Structured Finance Transactions, Aug. 28,
2008
-- Updated Project Finance Summary Debt Rating Criteria, Sept. 18, 2007

Ratings List
Affirmed
Oleoducto de Crudos Pesados (OCP)
Senior Secured debt rating BBB/Negative

(Caryn Trokie, New York Ratings Unit)