Fitch Ratings Affs CITGO Petroleum Corp. And PDV America, Inc.

Business Editors

CHICAGO--(BUSINESS WIRE)--Feb. 8, 2002

Fitch Ratings has affirmed CITGO Petroleum Corporation's (CITGO) senior unsecured debt rating of 'BBB' and PDV America's senior notes at 'BBB-' . CITGO is owned by PDV America, Inc., an indirect, wholly owned subsidiary of Petroleos de Venezuela S.A. (PDVSA), the national oil company of Venezuela. The Rating Outlook for CITGO and PDV America is Stable.

On Feb. 6, 2002, Fitch downgraded the Bolivarian Republic of DVenezuela's long-term foreign currency rating to 'B+' from 'BB-' and its long-term local currency (Venezuelan Bolivar) rating to 'B' from 'B+'. The sovereign ratings downgrade reflects the continued pressure on foreign exchange reserves from capital flight and the lack of appropriate economic policy action to restore confidence and stem the foreign exchange outflow. The Rating Outlook on the sovereign remains Negative.

Fitch believes that the sovereign's inclination to interfere with CITGO and PDV America is a function of the political and economic environment within the country. While the capital structures and strategic importance of CITGO and PDV America give substantial disincentives to the Venezuelan government to interfere, the potential for such actions is heightened should the sovereign further deteriorate in the rating spectrum.

Because CITGO receives more than 50% of its crude oil needs from PDVSA under long-term contracts and the United States is the single largest outlet for Venezuelan crude, the strategic importance of CITGO to PDVSA is clear. Pricing under the long-term supply contracts with PDVSA has historically provided CITGO with relatively stable refining margins. PDVSA management is also keenly aware of the importance of CITGO's credit rating and has been prudent in managing the subsidiary's credit profile.

Offsetting factors include the reinitiation of force majeure by PDVSA beginning in March 2002, forcing CITGO to find alternate sources for a portion of its crude oil supplies. Based on current price forecasts, management's expectations are that the force majeure will not have a material impact on the company's results this year. Due to the force majeure initiated by PDVSA in 1998, CITGO was forced to purchase a portion of its crude from alternate sources, costing CITGO an estimated $60 million. To date, CITGO and PDV America have had no cutbacks in crude supply from PDVSA due to the current force majeure, nor have the companies been notified of any reductions in future deliveries.

CITGO also continues to make substantial dividend payments to PDV America, and ultimately PDVSA. CITGO paid dividends of $278 million in the third quarter of 2001 and a total of $1.1 billion over the last four years. The debt covenants of CITGO and PDV America, however, restrict changes to the crude contracts with PDVSA and limit the dividends CITGO can pay. The most restrictive covenants with regards to dividend payments are contained in CITGO's five-year revolving credit facility and PDV America's senior notes, both of which mature next year, in May 2003 and August 2003 respectively.

Fitch believes that due to the stable financial position of CITGO and the importance of the company to its ultimate parent, these factors should not limit the ability of CITGO and PDV America to service its existing debt. Fitch, however, will be meeting with the management of CITGO and PDV America during the next few weeks to further discuss these issues that may impact the credit quality of the companies.

As one of the largest crude oil refiners in the United States, CITGO owns three complex crude refineries and two asphalt refineries with a total combined capacity of 750,000 barrels per day (bpd). The company also owns approximately 42% interest in LYONDELL-CITGO Refining L.P., a limited liability company that owns and operates a 265,000-bpd crude oil refinery in Houston, TX. CITGO markets refined products through more than 13,600 independently owned and operated retail sites.