TEXT-S&P revises Nacional del Petroleo outlook to stable

(The following statement was released by the rating agency)

Overview
-- Chile-based oil and gas company ENAP's stand-alone credit profile
(SACP) continues to weaken due to volatile profitability and weak cash flow
generation.
-- We are revising our outlook to stable from positive and the SACP to
'b' from 'b+', and affirming the 'BBB-' ratings.
-- The stable outlook still reflects our expectation that there is a very
high likelihood that the Republic of Chile would provide timely and sufficient
extraordinary support to the company in the event of a financial distress.

Rating Action
On July 30, 2012, Standard & Poor's Ratings Services revised its outlook on
Empresa Nacional del Petroleo (ENAP) to stable from positive. At the same
time, we revised the company's SACP to 'b' from 'b+'. In addition, we affirmed
our 'BBB-' ratings on ENAP.

Rationale
The SACP revision reflects ENAP's deteriorating financial performance,
particularly in the refining and marketing segment. This is due to lower
global refining margins, a relative appreciation of price for its crude oil ,
and rising energy costs. ENAP's high debt continues to weaken capital
structure and credit metrics. Because we expect the firm's free cash flow to
be negative in the next 12 months, ENAP is likely to continue refinancing most
of its short-term maturities, which will gradually increase its gross debt. We
expect that ENAP will continue to post funds from operations to total debt of
less than 5% and total debt to EBITDA of more than 10x during the next two
years amid continuing tight refining margins.

The SACP on the company incorporate its dominant as Chile's only domestic oil
refiner, volatility and cyclicality in international refining margins, weak
profitability and cash flow generation, and high debt and difficulties
reducing it because of very limited free operating cash flow. The SACP also
incorporates ENAP's enhanced financial flexibility and ability to tap credit
market thanks to government ownership. We continue to assess the company's
business risk profile as fair and its financial risk profile as highly
leveraged.

At the same time, the ratings on ENAP reflect our opinion that there is a very
high likelihood that the Republic of Chile (foreign currency: A+/Positive/A-1;
local currency: AA/Positive/A-1+) would provide timely and sufficient
extraordinary support to the company in the event of financial distress.

In accordance with our criteria for government-related entities, our view of a
very high likelihood of extraordinary government support is based on our
assessment of ENAP's very important role as Chile's only domestic oil refiner:
ENAP supplies about 70% of the local market's needs. The company also has a
very strong link with the Chilean state, particularly regarding debt
authorization, budget approval, and tax payments.

Liquidity
We assess ENAP's liquidity on a stand-alone basis as less than adequate. Our
assessment incorporates ENAP's very good access to refinancing, good standing
in credit markets, and sound relationship with banks, due to its government
ownership.
As of March 31, 2012, ENAP had about $222 million in cash and short-term
investments. In 2012, following a weak first quarter, we believe that the
company will likely generate annual EBITDA below $300 million, pay interest
payments of approximately $200 million, and fund capital expenditures of $250
million. Due to the company's very low or negative free cash flow, we
anticipate ENAP will continue to gradually increase its debt and refinance the
$668 million immaturity due 2012 and $338 million due 2013). We don't expect
ENAP to pay dividends in 2012.ENAP's financial debt doesn't not have financial
covenants.

Outlook
The stable outlook reflects our expectation that ENAP will continue to play a
very important role in Chile's energy policy. Any rating upside is limited at
this point and would depend on a significant improvement in the company's
SACP, for example, if it's able to materially reduce debt. We could lower the
rating if, in the next 12 months, there is further deterioration in ENAP's
stand alone credit quality or if we perceive that the company has become less
important to the Chilean government.

Related Criteria And Research
-- Key Credit Factors: Criteria For Rating The Global Oil Refining
Industry, Nov. 28, 2011
-- Rating Government-Related Entities: Methodology And Assumptions, Dec.
9, 2010
-- Stand-Alone Credit Profiles: One Component Of A Rating, Oct. 1, 2010
-- Key Credit Factors: Business And Financial Risks In The Oil And Gas
Exploration And Production Industry, Nov. 10, 2008
-- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008

Ratings List

Ratings Affirmed; CreditWatch/Outlook Action
To From
Empresa Nacional del Petroleo
Corporate Credit Rating
Foreign Currency BBB-/Stable/-- BBB-/Positive/--
Senior Unsecured BBB-

(Caryn Trokie, New York Ratings Unit)