Oil Report

TEXT-S&P on East Cameron Gas Co (Sukuk) 2006

  (The following statement was released by the rating agency)
  Jan 14 - Standard & Poor's Ratings Services today lowered its rating on
East Cameron Gas Co.'s $165.67 million investment trust certificates (Sukuk)
series 2006 to 'CC' from 'CCC+' and placed it on CreditWatch with negative
  The downgrade reflects the negative impact of the Sept. 3, 2008,
hydrocarbon mix shortfall enforcement event on the overriding royalty interest
in oil and gas reserves (ORRI), which is the primary collateral for the Sukuk.
This enforcement event was triggered by the breach of the 90% minimum stressed
reserve level of the hydrocarbon mix threshold stipulated in the transaction
documents. An accelerated payment schedule went into effect after a 30-day cure
period for the enforcement event expired, which shifted the scheduled Sukuk
return to monthly pay from quarterly pay.
  The negative CreditWatch status reflects the fact that we are conducting
an ongoing review of all related financial and reporting information available
as we monitor the impact on East Cameron Gas Co.'s securitization. The initial
'CCC+' rating assigned to the securitization reflected credit enhancement
available through production coverage, reserve and other accounts, gas price
hedges, gas hedge letter of credit, and off-take agreements.
  On Oct. 16, 2008, East Cameron Partners L.P. (ECP), the originator of the
East Cameron Gas Co. securitization, filed a voluntary petition for Chapter 11
bankruptcy. ECP also initiated an adversary proceeding asking for relief from
its obligations under the securitization purchase and sale agreement, and
essentially requested to re-characterize the sale of the ORRI to the East
Cameron Gas Co. securitization as a secured loan. The bankruptcy court has
since entered a preliminary injunction prohibiting the purchaser special
purpose vehicle (SPV) (Louisiana Offshore Holding LLC), the issuer SPV (East
Cameron Gas Co. Sukuk Trust), and the collateral agent from exercising any
remedies on the ORRI, pending a final determination in that adversary
proceeding. At the time the transaction closed, a legal opinion was delivered
concluding that ECP had transferred the ORRI to the purchaser SPV in a true
  Standard & Poor's is monitoring the court proceedings and assessing the
impact of ECP's Chapter 11 filing on the transaction's cash flow. We have
asked ECP, the issuer SPV manager, and share trustee, the collateral agent,
and the transaction administrator to provide all legal filings, servicing
reports, transaction event timelines, and supporting data. If we do not
receive the required information in a timely manner, we may initiate further
rating actions.
  For further information regarding this transaction, please refer to our
new issue report, "New Issue: East Cameron Gas Co.," dated Aug. 10, 2006,
available on RatingsDirect, the real-time Web-based source for Standard &
Poor's credit ratings, research, and risk analysis, at
Primary Credit Analysts: John Lampasona, New York (1) (212) 438-3619;
                      Cristal E Jones, New York (1) 212-438-1128;
Secondary Credit Analyst: Gary Kochubka, New York (1) 212-438-2514;
 (New York Ratings Team)