S&P Raised the Rating of Gazprom Neft to "BB+" from "BB"

International rating agency Standard&Poor's has raised the corporate credit rating of JSC Gazprom Neft from "BB" up to "BB +".

The rating forecast is "stable".

Simultaneously the rating of Gazprom Neft on the national scale was raised to " ruAA +" from "ruAA".

Increasing of the rating of Gazprom Neft follows to increase in the rating of Gazprom.

"Increase in the rating of Gazprom Neft keeps one step of difference with the parent company. Gazprom Neft is the key affiliated company of Gazprom in the sphere of oil recovery and is likely to fall under the definition of cross-default under obligations of Gazprom. This fact increases economic interest of Gazprom in supporting the company if necessary Owning 76 % of shares, Gazprom completely controls management and strategy of the company (the blocking stake under the Russian legislation makes 25 %). Given the fact that the majority shareholder of Gazprom, in its turn, is the Russian state, the risk of sovereign intervention for the company decreases, as the government actually already supervises the company", informs S&P.

"The stable forecast of Gazprom Neft rating reflects the stable forecast of the rating of the parent company.In its turn, the stable forecast of Gazprom rating reflects our expectation that the group will avoid essential increase of debts in 2006 in comparison with the end of 2005 as high export prices will help the company to finance growing capital investments at the expense of internal sources (capital investment plan has made $12 billion on gas business and $1.8 billion on Gazprom Neft)", the rating agency forecasts.

It is expected that financial results of Gazprom Neft in 2006 and 2007 will be high, considering the high prices for oil, but capital and other investments are expected to grow up to $1.9 billion, that will allow to support the volume of production at the expense of investments into new fields (in particular, Priobskoe), having compensated production decline at other large deposits. It is expected that the company will keep stable extraction (including Slavneft), as it is believed by S&P experts.The future evolution of the rating will mainly depend on the ratings of Gazprom and on the role of Gazprom Neft in the group. In particular, we shall watch whether Gazprom will buy out the stakes of minority shareholders (first of all, UKOS) (RTS: YUKO), how close the integration of Gazprom Neft in activity of the parent group will be and whether it will be possible to count on growth of support of the shareholder", S&P stated.