Fitch Ratings Comments on CITGO Petroleum Corporation

The ratings of CITGO Petroleum Corporation (CITGO) are not expected to change due to the announcement that Lyondell Chemical Company (Issuer Default Rating (IDR) of ‘BB-’ on Rating Watch Evolving) and CITGO have discontinued the auction process for the LYONDELL-CITGO Refining L.P. (LCR) refinery in Houston, Texas. Although bids exceeded $5.0 billion, these offers did not meet the owners’ views of the value of the facility. The announcement also indicated that the owners would seek other alternatives, including the possible acquisition of CITGO’s 41.25% interest in the 268,000 barrel per day (bpd) refinery by Lyondell or continuation of the joint venture. Fitch rates the debt of CITGO as follows:

* IDR ‘BB-’; * $1.15 billion senior secured revolving credit facility maturing in 2010 ‘BB+’; * $700 million secured term-loan B maturing in 2012 ‘BB+’;

* Senior secured notes ‘BB+’.

CITGO’s variable-rate IRBs are supported by letters of credit under the company’s credit facilities and are not rated by Fitch. The Rating Outlook for CITGO’s debt is Stable.

Although the ultimate outcome is uncertain, CITGO’s ratings incorporate Fitch’s expectation that net proceeds from the sale of its interest in LCR would be distributed to its ultimate parent, the Bolivarian Republic of Venezuela (Venezuela, long-term IDR of ‘BB-’ with a Stable Rating Outlook by Fitch). CITGO is also evaluating the sale of its two smaller asphalt refineries in Savannah, Georgia and Paulsboro, New Jersey. CITGO’s credit facilities allow for the distribution of gross proceeds of up to $3 billion of asset sales by CITGO, including inventories associated with the asset sales, but excluding the Lake Charles, Louisiana, and Corpus Christi, Texas, refineries. The credit facilities are secured by the Lake Charles and Corpus Christi refineries as well as the company’s current assets (accounts receivable and inventories).

CITGO’s ratings continue to be supported by the significant improvements made to the company’s balance sheet in recent quarters. CITGO’s three core refineries (Lake Charles, Corpus Christi and Lemont, Illinois) have also been upgraded over the past several years to process a high percentage of heavy sour crude. Heavy crudes continue to sell at a 20% to 25% discount to lighter sweet crudes such as the benchmarks West Texas Intermediate (WTI) and Brent. As the largest recipient of Venezuelan crude exports, CITGO remains a critical piece of Venezuela’s integrated oil strategy.

CITGO is one of the largest independent crude oil refiners in the U.S., with three modern, highly complex refineries and two asphalt refineries. Including the company’s 41.25% interest in LCR, CITGO owns 970,000 bpd of crude refining capacity. CITGO branded fuels are marketed through more than 13,000 independently owned and operated retail sites. CITGO is owned by PDV America, an indirect, wholly owned subsidiary of Petroleos de Venezuela S.A. (PDVSA), the state-owned oil company of Venezuela.

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.

Contact:

Fitch Ratings, Chicago Bryan Caviness, 312-368-2056 Jason Todd, 312-368-3217 or Media Relations:

Brian Bertsch, 212-908-0549 (New York)

Source: Fitch Ratings