Introduction to Petrozuarta Case

1. Introduction to Petrozuarta Case • Situation in Venezuela • Alternatives for PdVSA • Is the Investment Alternative Unique • How does the Investment Alternative Compare to other Alternatives • What are Risks in the Venture • How Would you Evaluate the Venture • Use Standard and Poor’s Tools to Evaluate the Venture

2. Petroleos de Venezuela (PDVsa) Perspective • Problems: • Credit rating and obtaining capita • Country credit rating • Produce without exceeding OPEC quota limits • Access to managerial and technical expertise • Sales contracts for heavy oil

3. Summary of the Project

4. Oil Production in the Orinoco Belt – Largest Reserves in the Western Hemesphere • Venezuela has the largest conventional oil reserves and the second-largest natural gas reserves in the Western Hemisphere. It also has vast deposits of extra-heavy crude oil and bitumen. • Venezuela consistently ranks in the top four sources of oil imports to the United States, meeting around 15% of US requirements. As the world's fifth largest net exporter, oil accounts for about half of total government revenues. • Venezuela has been producing oil for nearly a century and was an Opec founder-member.

5. Diagram of Facilities This shows the location of facilities Heavy oil is analogous to mining The upgrader is similar to a refiner

6. Heavy Oil Reserves and Reserve Risk

7. Petrozuarta and Other Potential Projects • Petrozuarta will produce an estimated 120,000 bbl/d of heavy oil, for upgrading into 103,000 bbl/d of 22° API gravity sync rude. Conoco hopes to get permission from PdVSA to increase capacity to 150,000 bbl/d by 2003. Conoco is contemplating an expansion of Petrozuarta to produce a further 120,000 bbl/d of heavy crude by 2006, which would be converted into refined products. Petrozuata's initial production of syncrude will be processed at PdVSA refineries and a Conoco plant at Lake Charles, Louisiana. • The other three projects include: ExxonMobil and Veba's (Germany) Cerro Negro; TotalFinaElf (France) and Statoil's (Norway) Sincor; and Phillips and Texaco's Ameriven. Cerro Negro is due to start producing 105,000 bbl/d of syncrude from mid-2001. Sincor could produce 160,000 bbl/d of syncrude beginning in 2002, later rising to 180,000 bbl/d. Of the four projects, Sincor will produce the highest quality grade, of 32° API, for sale on the open market. Limited production of 40,000 bbl/d has already begun. Ameriven has experienced the most delays and is not expected to begin production for about three years.

8. Case Objectives • Ability to use project financing in joint venture • Use of project financing to minimize institutional problems with other markets • Public ratings and “piercing the sovereign veil” • Risk identification

9. Use of Project Financing in Joint Venture • PDVSA had strong cash flow, but raising debt had problems because of the country risk problem. • Leverage of joint venture was higher than leverage of the national oil company or Conoco. • Ability to obtain investment grade rating lowered the cost of funds significantly • The project maintained Conoco’s ability to raise debt for other projects. • Contracts with buyers for quantity mitigated political and technological obsolescence risk.

10. Petrozuata Financing

11. Cash Collection in Petrozuata

12. Financing Process • Banks responded with $5 billion in bids • With bank debt, could do “road show” for the public debt • Because of favorable response in bond market, raised more than expected from banks and used $450 million in bank debt. • Tranches of public debt • $300 million 12-year maturity at 130 over treasuries (7.63%) • $625 million 20-year maturity at 145 over treasuries (8.22%) • $75 million 25-year bullet bonds at 160 over treasuries (8.73%) • Tranches of bank debt • $200 million 14-year maturity at 220 basis points • $250 million 12-year maturity at 208 basis points. • Bonds purchased by investment advisors, insurance companies, mutual funds, pension funds and individuals.

13. Financing • 1997 Americas Project Finance Deal of the Year (IFLR) • 1997 Project Finance Deals of the Year (Institutional Investor) • 1997 Americas Oil & Gas/Petrochemicals Deal of the Year (PFI)

14. Credit Spreads • See Emerging Bond Market Article on Covenants and Credit Spreads

15. Comments on the Transaction • “The project is a stunning achievement for the sponsors and for Venezuela” (Oil and Gas Journal) • “The deal attracted rave reviews across the project finance industry. Scores of bankers not even involved in the deal refer to it as the best ever done in project finance” (Euro week) • “Petrozuata’s feat in raising funds is nothing short of amazing. In terms of the amounts taken from both the bank and bond markets, the tenors achieved, pricing and the structure of the project itself, the package has no parallel (IFR) • “Petrozuata Finance … bulldozed over previous boundaries for bond maturities and deal size in the Rule 144A market, showcasing the growing ability of stronger-rated credits to borrow without political risk insurance.

16. Risk Identification and Mitigation • Reserve Risk • Relatively low – project used only about 7% of identified reserves in the region • Construction Risk • No general contractor • Each partner experienced significant contingencies • Revenue Risk • Volume sold under contract to refineries in the US • Price was not fixed, but break-even price was below the actual prices • The debt service reserve account provided protection against financial default

17. Problems with Use of Project Financing • The arrangement costs were high -- $15 million. • Negotiations took five years. • Negative Arbitrage was a significant cost because of the use of public debt.

18. Construction Progress • Petrozuata running over budget • Venezuela's Petrozuata oil venture has run about $ 400 mm above budget due to: • Higher than expected wage bills and an overvaluation of the local bolivar currency. • The finances of the $ 2.8 billion project have been further dented by lower-than-expected revenues from early production, according to Standard and Poor's. • Many Venezuelan exporters complain about the government's policy of overvaluing the local bolivar currency as a means of anchoring inflation.The partners, consisting Conoco Inc with 50.1 % and PDVSA with 49.9 %, plan to make the additional equity payments mostly in 1999. • Petrozuata managed to issue $ 1 bn in bonds to help finance the venture, and achieved interest rates considerably lower than the level the country pays for government debt."PDVSA has always been a very reliable partner...we therefore don't worry unduly about them defaulting or anything like that," said Rob McKee, executive vice-president of Conoco. "They realise as well as we do that it would be a very serious mistake to default on any of the promises we have made for that financing." • Petrozuata is the most advanced of three Orinoco ventures that together will pump 440,000 bpd of tar oil in three years.It is currently pumping 42,000 bpd of extra-heavy oil and Lizardo hopes to achieve 120,000 bpd by mid-2000 when a huge upgrading plant is due to be completed at the Caribbean export terminal Jose. Petrozuata has already completed construction of a 200 km pipeline to ship the oil to the coast.

19. Construction Risk • COST OVERRUNS • The original cost of the project as a whole was $2.4 billion. • The project was plagued by cost overruns mainly as a result of the difference between local inflation and the bolivar exchange rate. In addition, labour costs were higher than anticipated as the arrangements were renegotiated part way through the project. • According to public reports, this accounted for more than 80% of the more than $500 million additional costs of the total project. This rise in costs was met by the sponsors.

20. Petrozuata Completion Test • March 15, 2002 • Petrozuata, the heavy-oil joint venture between Conoco Inc. and Venezuelan national oil company Petroleos de Venezuela S.A. (PDVSA), today announced all performance requirements associated with the project financing have successfully been met. As a result, the institutional debt becomes non-recourse to Petrozuata's shareholders. • Earlier this week, the last of six completion certificates was delivered to the lenders as required, verifying compliance of stipulated conditions in the areas of reserves, operations, physical facilities, insurance, legal and finance. Accordingly, both Conoco and PDVSA are released from maintaining the $1.4 billion debt guarantees provided at the time of financing. DuPont, Conoco's parent company at the time of the project financing, and PDVSA had equally shared the guarantees, with DuPont's portion subsequently indemnified by Conoco. Conoco formally split from DuPont in August 1999.

21. Petrozuata Initial Operations • Petrozuata, the first of the heavy oil strategic associations, has been operating close to original expectations since achieving financial completion in March 2002. In the second quarter of 2003, Petrozuata averaged approximately 130,000 barrels per day (bpd) of extra heavy crude oil (EHCO) and approximately 112,000 bpd of syncrude (SCO). • Over the medium-term, Petrozuata's annual debt service coverage ratios (DSCRs) are projected to be lower than originally projected due to an estimated US$100 million in additional capital expenditures between 2002 and 2005. These supplementary investments are required to improve Petrozuata's operations at its upgrading facilities. • Although anticipated DSCRs are lower than originally expected, the project's economics remain strong for the assigned rating category. Once Petrozuata has completed its mandatory capital expenditures, annual Maya breakeven prices are projected to be in the US$10.00 to $11.00 per barrel (bbl) range. Maya prices have averaged US$16.00/ bbl over the past ten years.

22. Subsequent Problems • Crude oil prices fell and the Venezuelan economy was taken down • Sovereign debt spreads went to 13% above US treasuries • Country downgraded from Ba2 to B1 • Petrozuata’s bonds rated at 450 to 600 basis points above treasuries as compared to the 130-160 basis points at the time of issue.

23. Strike at PdVsa (November 2002) • Nov. 2002 -- Although the strike continues and little oil is being exported at this time, the offshore transaction collection account is expected to be fully funded from shipments made prior to the strike so that the next quarterly debt service payment due in February 2003 can be made without any drawdown from the transaction liquidity reserve. • With the liquidity reserve fully funded and available to cover the May 2003 payment if necessary, the structure is well protected even if the export disruption continues for several weeks or months. Nevertheless, it is uncertain how long it will take for the political and economic crisis to stabilize, and for PDVSA to begin operating at normal levels without further risk of disruptions to its production facilities and exports. • Consistent with Standard & Poor's policy to maintain a strong link between the foreign currency rating of the sovereign and a country's public sector entities, the rating has been lowered to maintain the existing five-notch enhancement above the sovereign's foreign currency rating.

24. PdVsa Strike • The continued placement of the Petrozuata bonds on CreditWatch reflects the negative developments in Venezuela that have begun to and that could continue to disrupt Petrozuata's production, transport, and processing of heavy crude oils and its export of synfuel products. The developments include a strike by management and employees of PDVSA, which has led to a large reduction in domestic production and refining, and a large drop in exports of crude oil and refined products, and growing civil unrest betweenthe government and opposition groups.ConocoPhillips has reported that Petrozuata operations began to be affected by the strike on Dec. 9, due to insufficient supply of hydrogen at the upgrader in Jose. PDVSA supplies the hydrogen. This curtailment on operations has resulted in a reduction of oil production to 80,000 barrels per day from 120,000 bpd. Petrozuata does not rely on PDVSA for any other major inputs. There are no operational problems with transportation of crude oil to the Jose complex and export operations are normal.

25. S&P Ratings and the PdVsa Strike • The five-notch enhancement reflects the strength of the structure and its ability to mitigate sovereign interference, and is the most enhancement given to a structured transaction rated by Standard & Poor's and issued by a public sector entity. The five-notch enhancement is also comparable to the strongest structures rated by Standard & Poor's and issued by the private sector. • The structural features of the transaction include the deposit into an offshore account of payments by designated customers of PDVSA (including PDVSA's wholly owned subsidiary, Citgo Petroleum Co.). In addition, once the strike is over and exports resume, there is a strong incentive for the sovereign to continue to allow PDVSA Finance to service its debt, even if the political and economic crisis continues and the sovereign is in default on its own obligations. Ensuring that PDVSA continues to operate efficiently and productively is of strategic importance to the country due to its heavy reliance on oil revenues.

26. Moody’s Comments – Post Strike (Spring 2003) • Moody's had changed its outlook to 'negative' after the opposition-sponsored strike/lock-out and sabotage of the oil industry from December 2002 until February of this year, crippled production output of Venezuela's main industry. • Computer systems, valves and pipelines were sabotaged by PDVSA's executives and managers who aligned themselves with opposition leaders seeking to oust democratically elected President Hugo Chavez. • One third of PDVSA's workforce -most of them managers and executives- was fired, and replaced with retired or new personnel. PDVSA's current oil output is at pre-strike levels of 3.1 million barrels per day. • Moody's upgraded outlook for these heavy oil projects, are in tone with the sustained recovery of Venezuela's economy after the crippling strike. Unemployment has gone down by almost 3%, and inflation has started to drop after currency exchange controls were imposed during the strike/lock-out in order to slowdown capital flight.

27. Upgrade after Strike (Sept 2003) • Sept., 2003--Fitch Ratings has upgraded the senior secured debt ratings of the four Venezuelan heavy oil strategic associations, Petrozuata, Cerro Negro, Sincor, and Hamaca, to 'B+' from 'B' and removed the Rating Watch Positive status. • The rating actions reflect the normalization of the operational and financial performance at each of the heavy oil strategic associations following the national strike that virtually paralyzed Venezuela's oil industry between December 2002 and February 2003. Although the standalone credit profile of each of the four heavy oil projects suggests a rating level significantly higher than that assigned, the Venezuelan sovereign's credit profile continues to constrain their credit quality. Notwithstanding this limitation, legal and structural features of the related financings allow the projects to be rated two notches above the sovereign's assigned long-term foreign currency rating. • In June 2003, Fitch upgraded the long-term foreign currency rating of the Bolivarian Republic of Venezuela to 'B-' from 'CCC+' and the long-term local currency (Venezuelan bolivar) rating to 'B-' from 'CCC'. The Rating Outlook for Venezuela is Stable. Fitch believes that the probability of a sovereign-related interruption in oil operations similar in scale to that recorded at the beginning of 2003 to be low. Given the projects' exclusive reliance on critical raw material inputs from Petroleos de Venezuela S.A. (PDVSA), any future prolonged work stoppages at state-owned PDVSA or its affiliates would likely hinder the operational and financial viability of the heavy oil strategic associations. • The combination of strike-related operational interruptions at PDVSA and the temporary suspension of Venezuela's oil export flows rendered the heavy oil strategic associations unable to generate revenues during a two-month period. Despite the absence of internal cash flows, the projects were able to maintain adequate liquidity, covering ongoing operating and financial obligations during this period. The four strategic heavy oil associations resumed oil exports immediately after the strike ended in late February. • By the second quarter of 2003, production volumes at all four projects had either recovered to, or exceeded, pre-strike levels. It is important to note that the national labor action did not permanently impair any of the projects' facilities, infrastructure or labor force. During the two-month forced shutdown, the projects implemented cash preservation efforts and conducted maintenance on their facilities. These efforts, coupled with the benefits afforded by the prevailing strong crude oil price environment, have helped to mitigate the strike's adverse effect on the heavy oil projects' 2003 financial performance. Hence, the strategic associations' debt service capacity for the current calendar year is projected to come in line with original expectations.

28. Post Strike • The sovereign downgrade reflects the increasing probability of default given the environment of growing political polarization, critical social divisions, and economic paralysis due to the ongoing strikes. The manner in which the political impasse could be resolved remains uncertain as the opposition stiffens its resolve and President Chavez hardens his position. Removal of President Chavez would likely lead to a heightened mobilizationof his supporters and result in increased violence. Moreover, the opposition remains fragmented, and a leader who might be able to begin to bridge the country's growing social divide has not yet appeared. If President Chavez remains in power, there is an increased probability that his administration will become more radical, especially if a state of emergency is called. Regardless of the outcome, the country's political institutions remain extremely weak, and their independence is almost completely compromised. A resolution of the stalemate will not likely satisfy either side sufficiently to reduce the tensions undermining government rule and economic stability.

29. Political Situation • The worsening political situation in the country could lead to more widespread developments that could negatively affect the company's wide range of operations. Petrozuata and other heavy oil projects with operations at the Jose complex have in the past been negatively affected by indirect strike actions, which were resolved by government intervention. Also, there is increased risk of sovereign intervention in the oil and gas sector,especially if the strike action continues unabated, as the country's lack of exports would seriously deteriorate the government's financial position.Standard & Poor's expects to resolve the CreditWatch as developments warrant. The rating could fall if Petrozuata's operations are affected such that disruptions lead to material cash flow loss, an adverse government intervention into the sector or the project occurs, or a further deterioration in the creditworthiness of the sovereign.

30. Postscript • Royalties increased from 1% to 30%. This excludes an additional tax that is identical to royalties. The total is 50%. • Additional income tax. • Required contributions to social funds. • PdVsa increasing ownership to majority – from 49% to 51% (PdVsa had been making decisions before anyway.) • Investment still profitable because of oil prices. • New investments from Chinese and Russian companies. • PdVsa management changed after attempted coup.

31. Fitch Downgrade in 2006 • NEW YORK--(BUSINESS WIRE)--May 11, 2006--Fitch has downgraded to 'B+' from 'BB' the ratings that apply to the senior secured debt obligations of the four Venezuelan heavy oil strategic associations: Petrozuata, Cerro Negro, Sincor, and Hamaca. The ratings are placed on Rating Watch Negative. • Petrozuata Finance Inc. (Petrozuata) • US$300 million 7.63% series A bonds due 2009; • US$625 million 8.22% series B bonds due 2017; • US$75 million 8.37% series C bonds due 2022. • Today, the National Assembly amended the organic hydrocarbons law to impose a new oil extraction tax of 33.33%. The tax is calculated on the same basis as the oil royalty, and the royalty of 16.66% that applies to the strategic associations is deducted from the tax. Effectively, remittances payable to the government on the value of crude at the well head are doubled. Royalties were previously raised ahead of expectations in 2004 from a preferential rate of 1% to 16.66% in 2004. The agreed 1% rate was adopted in the 1990s to incentivize private development of the Orinoco Basin reserves at a time of prolonged weakness in oil prices and in recognition of Venezuela's need to improve its oil producing infrastructure. • The government has also announced its intention of increasing from 34% to 50% the corporate income tax applicable to the strategic associations. Fitch anticipates that the much heavier royalty and tax burdens combined with the deleterious effect of persistent double-digit inflation in Venezuela will substantially diminish cash flows available for debt service. In its oil price deck, Fitch expects a gradual return to the long-term historical average in the mid-US$20s per barrel for West Texas Intermediate by 2009, which combined with imposed limits by the government on production, could result in net revenue falls of as much as 60%. Despite the operational success of the projects and the benefit of unexpectedly high oil prices, royalty and tax remittances reduced project revenue in 2005 by an average of 40% from 2004. Fitch considers it likely that with the most recent revisions of the fiscal regime applicable to the projects and a decline in oil prices to historical averages, the ability of the projects to service debt obligations in full could be impaired by 2011 or earlier.

32. Fitch Downgrade in 2006 Continued • The Rating Watch Negative status indicates there is a reasonable probability of additional rating downgrades in coming months. In addition to the oil extraction tax, the law amendment created a new levy of 0.1% on hydrocarbon export registrations which will be computed on the product's sales price to customers. Additional taxes and royalty increases cannot be ruled out. • The Rating Watch also portends the uncertainty associated with a restructuring of the strategic associations as 'mixed enterprises'. It remains unclear whether the government will in fact pursue such a restructuring and whether the foreign partners in the associations will accept or reject the terms of the Chavez administration. However, using the government's treatment of the operating agreements between Petroleos de Venezuela SA (PDVSA) and foreign producers as a guide, in essence, the private partners in the associations might relinquish majority ownership in the existing associations such that PDVSA will hold at least 51% of the equity as well as operating control of the projects. A restructuring raises serious concerns regarding compliance with the terms of the Common Security Agreements and the Transfer Restriction Agreements that govern the debt financing of the projects as well as the Charters that underpin the project's legal existence. • Petrozuata is domiciled in Venezuela and are key to the development of the Orinoco Basin's extra heavy crude oil reserves. Debtholders rely solely on the ability of each project to generate sufficient cash flow from operations to meet scheduled debt service. Revenues are largely derived from the sale of syncrude exports. Petrozuata is owned 50.1% by a ConocoPhillips subsidiary and 49.9% by a PDVSA subsidiary. Cerro Negro is owned 41.67% by an ExxonMobil subsidiary, 41.67% by a PDVSA subsidiary, and 16.67% by a Veba Oel subsidiary. Sincor is owned 47% by a TOTAL subsidiary, 38% by a PDVSA subsidiary, and 15% by a Statoil subsidiary. Hamaca is owned 40% by a ConocoPhillips subsidiary, 30% by a ChevronTexaco subsidiary, and 30% by a PDVSA subsidiary.

33. Current Rating of Petrozuta • S&P Lowers Ratings to 'B+'; Still on Watch Standard & Poor's Ratings Services lowered its rating on Petrozuata Finance Inc.'s $1 billion bonds to 'B+' from 'BB-'.Petrozuata is a heavy oil upgrading project located in Venezuela that is owned by Conoco Orinoco (50.1%), a subsidiary of ConocoPhillips (A-/Stable/A-2), and PDVSA Petroleo Y Gas (49.9%), a subsidiary of Petroleos de Venezuela S.A. (PDVSA:CCC+/Negative/--). • The downgrade on Petrozuata's bonds follows Friday's downgrade by Standard & Poor's of the credit rating on the Bolivarian Republic of Venezuela to 'CCC+' from 'B-'. • The rating outlook for Venezuela is negative. The downgrade and negative outlook on the sovereign reflects the increasing probability of default given the environment of growing political polarization, critical social divisions and economic paralysis due to the ongoing strikes. The manner in which the political impasse could be resolved remains uncertain as the opposition stiffens its resolve and President Chavez hardens his position. Removal of President Chavez would likely lead to a heightened mobilization of his supporters and result in increased violence.

34. Earlier Fitch Discussion • A higher royalty rate erodes the debt service capacity of the projects, because it increases operating expenses. For the Orinoco ventures, the oil royalties paid by each of the projects as a privilege levy on the extraction of a natural resource are derived from a PDVSA defined oil price benchmark. At an assumed oil price of US$35 per barrel for WTI (West Texas Intermediate) in 2005 and a sustained long-term price of US$22 per barrel from 2006 onward, each of the four project's cash flow capacity during the initial applicable years is estimated to decline in the range of 9% to 23%. • Notwithstanding the deterioration in the economic profile of the projects attributed to the higher royalty burden, and irrespective of any ratings constraints that might be associated with PDVSA or Venezuela's sovereign environment, their credit quality remains consistent with Fitch's current 'BB' ratings. Finally, a sustained low-cycle oil price could further weaken the projects' debt service capacity prompting future rating downgrades.

35. Royalty Comments • While it is reasonable, given current oil prices, to increase the royalty to this level, I am not comfortable with the way it has been done. First of all, these were contracts signed by PDVSA in which that royalty percentage was negotiated. Second, it would seem more reasonable to negotiate it with the companies, establishing a sliding schedule in case prices go down in the future. Third, I understand that all of the projects are looking to expand their operations in Venezuela; maybe this could have been negotiated rather than imposed, as it does not send the best signal to investors looking for new oil deals in Venezuela. • The biggest problem in my mind with the decision is one of competitiveness; Canada and Venezuela have the biggest heavy oil reserves in the world. These projects are similar to much larger projects in Canada, which have found a way to exploit these heavy crudes. In Canada, according to the Suncor report, the royalty is 1%, which is probably the reason why PDVSA negotiated that rate when the projects were started. Note that there are royalties and there are taxes, in both countries the royalty was 1% until today. Suncor as a company pays an effective tax rate of 36% which is probably similar to Venezuela’s. Thus, Canada is more attractive from that point of view. • I am in no position no to know or evaluate at this time whether this hurts Venezuela’s competitive advantage in heavy crudes or not. There are other issues to consider such as production costs. These projects make use of natural gas, which is cheaper in Venezuela, so that may be an advantage. Financially at current oil prices the decision should not affect any of the projects as they were planned for much lower oil prices. The one affected the most is Hamaca, which only came on line recently, the rest have benefited for quiet a while of the lower royalty.

36. Moody’s Recent Comments on Royalty Increases and High Oil Prices • Hamaca, Sincor, Cerro Negro, and Petrozuata on downgrade review at Ba3Approximately $3.1 Billion Of Securities And Bank Loans Affected • April 26, 2006 -- Moody's Investors Service placed under review for downgrade the Ba3 foreign currency ratings of the secured long-term debt of four heavy oil upgrading projects in Venezuela. The rating review reflects concern that government action to increase its role in the projects and raise tax and royalty payments may weaken the debt service coverage and structural protections for debt holders. In addition to sharp increases in the royalty and income taxes levied on the projects, the government appears to be seeking to forcibly increase (PDVSA) ownership to a majority stake in each of the projects, following the same pattern that resulted in increased government ownership of various conventional oil concessions owned by foreign investors. • Moody's notes that the projects have been subject to successive increases in royalties from a contractual 1% rate to 30%, and the government also has announced plans to increase income taxes on these and other oil projects to 50% from a current 34% rate. Under the Chavez government, PDVSA appears to be moving to taking majority or greater stakes in the projects, with unknown consequences for ultimate ownership, governance, management and operation of the projects, as well as their future strategic direction. • The Ba3 rating for the foreign currency debt of each project incorporates a baseline credit assessment of 6 (on a scale of 1 to 6, where 1 represents the lowest credit risk), the B1 local currency Issuer Rating of PDVSA, and Moody's assessments of low dependence and support levels. • The review will consider that all of the projects continue to operate profitably and demonstrate robust pre-tax returns under current oil price conditions. Cash flow coverage could be affected in the future by oil price declines as well as the steep increases in royalties and income taxes. However, unilaterally originated changes in ownership, taxes and royalties would suggest that the project structural protections that have supported higher ratings in the past have become less relevant as support for the ratings.