TEXT-Moody's release on Oil and Natural Gas Corporation Ltd

(The following statement was released by the ratings agency)

Aug 27 - Moody's Investors Service sees no impact on the A2 long-term local currency rating of Oil and Natural Gas Corporation Ltd (ONGC.BO: Quote, Profile, Research) (ONGC) from its announcement that it has -- through wholly owned subsidiary ONGC Videsh Ltd - reached an agreement on the terms of a recommended pre-conditional cash offer for Imperial Energy. The rating outlook is stable.

The ONGC offer would value Imperial Energy's share capital at approximately US$2.8 billion, but the transaction is subject to shareholder and regulatory approvals. In addition, other bidders may emerge in the process, so there is no certainty at this stage as to whether it will ultimately occur or not.

"If ONGC's bid is successful, the transaction is likely to have no impact on the company's rating, given it is in line with its strategy to target acquisitions of oil & gas assets overseas, and which would help increase production as well as mitigate concerns over the mature state of its domestic reserves" says Iván Palacios, Moody's lead analyst for ONGC.

"In addition, the impact of the proposed acquisition on ONGC's financial profile is expected to be very limited, due to Imperial Energy's small size and ONGC's strong credit protection measures, solid liquidity profile and sound free cash flow generation," adds Palacios.

As an indication of its financial flexibility, ONGC expects to fund the purchase from cash on its balance sheet, which -- as of March 2008 was Rs. 187 billion (or US$4.3 billion).

"Following this transaction, Moody's expects ONGC's liquidity profile to remain very strong, supported by the group's expected solid free cash flow generation, very low financial leverage and negligible debt," adds Palacios.

Imperial Energy is an oil and gas exploration and production company focused on the Commonwealth of Independent States. It had proved reserves (1P) of 174.6 million barrels of oil equivalent (boe) of crude oil and gas as of December 2007. It also has probable and possible reserves of 3.4 billion boe, which represents a good opportunity; however this is subject to significant execution risks. Founded in 2004, Imperial Energy reported oil sales of US$20 million and operating losses of US$40 million in 2007.

Oil & Natural Gas Corporation Ltd is India's flagship exploration and production company, accounting for 75% of total proved reserves in India. ONGC has proved reserves of over 7 billion boe and annual production of around 428 million boe. It is listed on the Indian stock exchange and is 74.14% owned by the Indian government.