TEXT-Moody's release on JSC Tatneft

(The following statement was released by the ratings agency)

Aug 7 - Moody's Investors Service (Moody's) assigned a Ba2 corporate family rating (CFR), to JSC Tatneft (TATN3.MM: Quote, Profile, Research) ("Tatneft"). In conjunction with the CFR rating, a Probability of Default Rating (PDR) of Ba2 was also assigned. The outlook is stable.

Tatneft is Russia's sixth largest oil & gas company operating predominantly in the Republic of Tatarstan (Ba1/Stable), in which the Tatarstan government holds 36% plus golden share. Under SPE-LOL classifications, Tatneft's proved oil & gas reserves at year-end 2007 amounted to 3.16 billion barrels of oil equivalent (boe). In 2007 Tatneft produced 184 million boe, translating into an average production rate of 0.5 million boe per day (boepd). The company employs 80,000 people.

Tatneft is operating in three major segments: exploration and production, refining and marketing and petrochemicals, which contributed 74%, 18% and over 7% to the company's consolidated 2007 revenue respectively. It also operates a network of 566 petrol stations in Russia and Ukraine, and its petrochemicals operations, OAO Nizhnekamsknefteshina, have a 28% share of the Russian tire market.

The company's strategic objective is to transform itself from a predominantly upstream player to an integrated oil and gas company. In 2006 Tatneft embarked on the construction of a green field refinery and petrochemical facility, Taneco, which, once completed, will introduce a 7mtpa refining capacity thereby visibly transforming Tatneft's business profile, strengthening its vertical integration and profitability. The current virtual absence of proprietary refining capacities is considered by Moody's as Tatneft's major weakness, compared to its peer group. Given the state-controlled nature of the company's shareholding structure, Tatneft's ratings incorporate Joint Default Analysis, Moody's methodology for government related issuers (GRIs). In accordance with this methodology, the Ba2 rating of Tatneft reflects the combination of the following inputs:

- Baseline Credit Assessment ("BCA") - which measures the company's fundamental credit strength excluding any government support - of 12 (on a scale of 1 to 21 corresponding to the equivalent of a Ba2 rating).

- Ba1 local currency rating of the Tatarstan

- High dependence

- Medium support