TEXT-Fitch release on KazMunaiGaz Finance Sub B.V.

(The following statement was released by the ratings agency)

June 13 - Fitch Ratings has today assigned KazMunaiGaz Finance Sub B.V.'s (KMG Finance Sub B.V) proposed global medium-term note programme of up to USD3bn an expected senior unsecured 'BBB' rating. The expected rating is in line with the programme guarantor KazMunaiGaz National Company's (NC KMG) Long-term foreign currency Issuer Default rating (IDR) of 'BBB'. At the same time, NC KMG's Long-term foreign and local currency IDRs of 'BBB' with Negative Outlooks and Short-term foreign currency IDR of 'F3' are affirmed. The final rating on the note programme is contingent on the receipt of final documentation conforming to information already received.

Under this note programme, KMG Finance Sub B.V., a private company with limited liability incorporated in the Netherlands, issues notes and lends the proceeds to NC KMG. The proceeds from the note issue will be used to finance the capex programme for the Kashagan project and general corporate purposes. The notes will be governed by English law.

Covenants in the note programme include, among others, an equal ranking of the notes with current and future unsecured obligations of NC KMG and a negative pledge for NC KMG. Furthermore, the notes have the benefit of a cross default provision. NC KMG also has a maximum net leverage (net debt/EBITDA) covenant of 3.5x, with net debt calculated as consolidated gross debt minus cash at the NC KMG level. With a net debt/EBITDA ratio of 1.6x at FYE07 (computed by Fitch based on the formula stipulated above), the company has significant headroom under the above-mentioned covenant. In addition, dividend payments are limited to 50% of consolidated net income.

NC KMG is a wholly state-owned enterprise with operations in upstream, midstream and downstream businesses. The company represents the Kazakh government's interests in the oil and gas sector in Kazakhstan, which is a driving force of the country's economy. Despite a rather aggressive acquisition policy in 2007 (total acquisitions in excess of USD3bn), and an increase of gross debt to KZT1,222bn (USD10.2bn - up 81% yoy), its FYE07 net debt stood at KZT390.4bn (USD3.2bn), due to a high consolidated cash position of KZT831.6bn (USD6.9bn). As a result, net leverage of 0.6x in 2007 was little changed from the 0.5x posted in 2006 despite gross leverage increasing to 1.8x from 1.5x. The group maintained strong profitability on the back of favourable oil and gas industry fundamentals, with its EBITDA margin reaching 48.8% in 2007 (41% in 2006).

NC KMG's Negative Outlook reflects Kazakhstan's Outlook as its ratings are aligned with those of the sovereign.