Fitch Affirms Pan American Energy's 'B+' Foreign Currency Rating.

CHICAGO -- Fitch Ratings has affirmed Pan American Energy LLC's (PAE) international foreign currency rating at 'B+' and local currency rating at 'BB-'. A Stable Rating Outlook has also been assigned.

The ratings reflect the continued strength of PAE's financial flexibility and credit protection measures. The rating is also supported by PAE's high level of dollar denominated revenues from exports, its ability to maintain a material amount of export revenues offshore, and expanding base of hydrocarbon reserves. The ratings further reflect the risks of operating in Argentina, commodity price volatility, and operational risks typical of the industry.

PAE is the second largest and efficient hydrocarbon producer in the Argentine market. Crude oil sales as of fiscal year 2004 represented 83% of total revenues and production is currently at its peak. During the first half of 2005, PAE's cash generation has benefited from the combination of the high international crude oil price environment and the company's export-oriented profile. These positives coupled with production increases contributed to a 20% rise in revenues to US$869 million through June 2005 from US$725 million through June 2004.

As of June 2005 credit protection measures were at record levels, with EBITDA/interest of 25 times (x), EBITDA-capital expenditures/interest of 11x, total debt/EBITDA of 0.7x and a total debt-to-capitalization of 16%, metrics considered strong for the ratings category.

PAE's investment requirements are significant, averaging approximately US$420 million per annum and increasing to US$550 million in 2005, mainly focused on the development of reserves at the Cerro Dragon basin. These capital requirements are expected to be funded with PAE's strong internal cash generation and potentially new external financing. Fitch estimates financial leverage will be maintained at reasonable levels given its strong cash flow from operations and conservative capital structure target.

Total financial debt at June 2005 was approximately US$720 million. PAE's current debt profile includes short-term debt of US$177 million, plus current portion of long-term debt of US$157 million and long-term debt of US$372 million. In mid September PAE repaid in full a US$100 million bullet bond guaranteed by its parent company, BP plc (BP). Almost at the same time, PAE received the second disbursement of the IFC loan (total accrued US$175 million). Core borrowing facilities are generally held at the Argentine Branch level. Given PAE's conservative balance sheet, the company is expected to continue to issue debt on a periodic basis to refinance maturities, extend the average life of its debt, and maintain a relatively stable debt-to-capitalization ratio.

PAE is owned 60% by BP and 40% by Bridas and has been the vehicle for the exploration and production of oil and gas and mid- and downstream gas activities in the southern cone. Historically, PAE's main cash generating assets were located in Argentina, at the Pan American Energy LLC, Argentine Branch level.

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