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    Citgo's Rating Falls

    Prolonged strike in Venezuela casts oil company into uncertainty, says Fitch Ratings.

    TULSA, Okla. -- Citgo Petroleum Corp., the independent oil concern whose downstream distribution is 100-percent marketer driven, is facing the ill effects of Venezuela's prolonged national strike.

    The company, owned by Venezuelan interests, watched as Fitch Ratings placed the oil company's debt ratings on Rating Watch Negative as a result of the political uncertainty underlying Venezuela's strike. Citgo is owned by PDV America, a wholly-owned subsidiary of Petroleos de Venezuela S.A. (PDVSA), the national oil company of Venezuela.

    "Fitch believes that the supply interruptions from Venezuela will remain in place at least as long as the national strike continues unabated. The oil sector's overwhelming support for the three-week old strike has effectively shut down Venezuela's hydrocarbon industry, disrupting crude oil and derivative product export flows," Fitch said in a statement earlier this week.

    "The continued sovereign uncertainty may result in shareholder interference with Citgo and PDV America, impairing their financial flexibility. A further deterioration in the credit quality of Venezuela and PDVSA could result in a multiple notch reduction in the ratings of PDV America and Citgo."

    Officials at Citgo could not be reached for comment. Fitch does note that Citgo has been able to secure adequate crude from alternative sources and that the independent oil concern is convinced it can maintain sufficient supplies over the long term.

    Yet, Fitch said, "the refinery's optimal performance is designed for the Venezuelan crude specifications, and as such, alternative crude slates may adversely impact Citgo's overall economics."

    For the short-run, Fitch believes Citgo should overcome existing obstacles, pointing out that the company has approximately $400 million in liquidity available through its credit facilities and trade accounts receivable program. In mid-December, Citgo entered into a new $520 million credit facility to replace the credit facilities maturing in May 2003.

    Citgo is one of the largest independent crude oil refiners in the United States, with three modern, highly complex crude oil refineries and two asphalt refineries with a combined capacity of 756,000 barrels per day. The company markets product through 13,400 independently owned and operated retail outlets.

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