Moody's assigns A1 ratings to Dolphin Energy's new bonds; stable outlook

Affirms A1 ratings on existing senior secured debt facilities

London, 09 February 2012 -- Moody's Investors Service has today assigned definitive ratings of A1 to the USD1 billion of new senior secured bullet bonds due 2021 (the "New Bonds") issued by Dolphin Energy Limited, a company formed in 2002 in Abu Dhabi, in the United Arab Emirates, to deliver and manage an integrated gas production and distribution project ("the Project"). Concurrently, Moody's has affirmed the A1 ratings on Dolphin Energy's existing senior secured debt facilities (the "Existing Debt"), excluding its SACE facility (see list below). The rating outlook is stable.

The definitive ratings confirm the provisional ratings that Moody's assigned on 13 June 2011. The rating rationale is set out fully in a Credit Analysis published on 14 June 2011.

The New Bonds will rank pari passu with Dolphin Energy's Existing Debt (excluding its commercial bank loan facility (see list below), which will be refinanced). The Existing Debt initially comprised:

- USD1.42 billion uncovered amortising commercial bank loan facility due June 2019

- USD1.25 billion of 5.888% amortising bonds due June 2019

- USD1.22 billion of Sponsor Co-Loans due June 2019

- USD218 million SACE covered amortising loan facility due June 2019 (unrated)

Dolphin Energy will use the proceeds of the New Bonds to refinance USD835 million of outstanding balances under the commercial bank loan facility and the remainder will be used to pay an extraordinary dividend.

Moody's has classified Dolphin Energy as a government-related issuer (GRI) given that Mubadala Development Company PJSC (Aa3 stable), which is 100% owned by the government of Abu Dhabi, holds 51% of Dolphin Energy's equity through a holding company. Moreover, the Abu Dhabi government has committed to maintaining effective ownership of this majority stake for the life of the project.

Moody's has therefore applied its rating methodology on "Government-Related Issuers: Methodology Update", published in July 2010.

RATINGS RATIONALE

Moody's A1 rating of the New Bonds incorporates the following inputs: the baseline credit assessment (BCA) of Dolphin Energy; (ii) the sovereign rating of the government of Abu Dhabi (Aa2 stable); (iii) Moody's assessment of the likelihood of extraordinary support being provided to Dolphin Energy by the government as being "high" (i.e., within a range of 71%-90%); and (iv) the rating agency's assessment of default dependence as being "very high" (i.e., 90%). Applying the GRI Methodology leads to a significant ratings uplift from the Project's BCA.

The BCA for Dolphin Energy is 8 (equivalent to Baa1), and falls within the scope of Moody's rating methodology "Generic Project Finance Methodology", published in December 2010. In broad terms, the BCA reflects the compelling commercial and industrial rationale of the Project, and strong competitive position that Dolphin Energy enjoys as a world-class low-cost producer; (ii) Dolphin Energy's exposure to hydrocarbon price risk, although such risks are substantially mitigated by the Project's unusual degree of resilience to downside price sensitivities; (iii) the Project's successful operating history of four years; (iv) certain event risk considerations including asset concentration risk and geopolitical risk; (v) satisfactory financial metrics, notwithstanding a degree of refinancing risk; and (vi) the beneficial structural features of the Project, subject to the absence of certain security interests and a high degree of freedom under the financing agreements to raise Replacement Debt and Supplemental Debt (subject to certain caps). The New Bonds are categorised as a combination of Replacement Debt and Supplemental Debt.

The Project has performed well since it was first rated by Moody's and had Dolphin Energy not been exposed to bullet refinancing risk, there would have been upward pressure on the company's BCA. Given high oil prices, the Project achieved an average debt service coverage ratio of 3.28x in 2011 (slightly up from 3.23x in 2010) and in 2011 it also achieved the maximum production volume of 730 billion cubic feet (Bcf) per annum. Its 2011 total operating costs of USD432 million were slightly below the budgeted costs of USD396 million. However, this strong performance is offset by the modest increase in the Project's leverage and the exposure to refinancing risk associated with the New Bonds, although this risk is reduced by a sinking fund arrangement.

Moody's notes that the Iranian threat late last year to block oil shipments through the Strait of Hormuz could have a very material impact on Gulf Cooperation Council (GCC) oil producers, given that they export more than 90% of their oil through the strait. Although Dolphin Energy is not dependent on shipping to transport its gas to market, it is dependent on the strait for the shipments of its by-products, or liquids. The Project generates around 50% (depending on oil prices) of its revenues from liquids, which it sells to Tasweeq (the centralised marketing entity controlled by the Government of Qatar) and which Tasweeq then exports from different ports in Qatar. A long-lasting Iranian blockade of the strait could therefore have a material impact on Dolphin Energy, although under this scenario, the debt service reserve would allow Dolphin Energy to meet debt service payments for at least six months.

However, Moody's notes that a blockade of oil shipments through the Strait of Hormuz remains unlikely for two reasons. Firstly, the US government has made it clear that freedom of navigation, whether in the Persian Gulf or elsewhere, remains a core national interest. Importantly, the US has the naval power to back up its interests in the Fifth Fleet based in Bahrain with a forwardly deployed aircraft carrier patrolling the Gulf and the Middle Eastern seas. Secondly, an Iranian blockade would disrupt the country's trade relations with the GCC, on which it depends for most of its imports. Moreover, imposing a blockade would violate Oman's territorial waters, which would likely force it from its policy of neutrality. However, there remains a risk of miscalculation. The US and EU are leading an international sanction regime in an intensified effort to force Iran to halt its nuclear weapons programme.

WHAT COULD CHANGE THE RATING UP/DOWN

An upgrade of the sovereign rating of the government of Abu Dhabi could lead Moody's to upgrade Dolphin Energy's rating. Conversely, Moody's could downgrade the rating if it were to downgrade the sovereign rating of the government of Abu Dhabi; (ii) it were to revise downwards its assumption that there would be a high level of governmental support available to Dolphin Energy in the event of need; or (iii) Dolphin Energy's BCA were to weaken. PRINCIPAL METHODOLOGY

The principal methodologies used in rating Dolphin Energy were Generic Project Finance Methodology, published December 2010, and Government-Related Issuers: Methodology Update, published July 2010.

Dolphin Energy Limited is a special purpose entity formed in 2002 in Abu Dhabi to deliver and manage an integrated gas production and distribution project. Specifically, the purpose of the Project is to deliver gas from Qatar's North Field to customers principally in Abu Dhabi, Dubai and Oman for a duration of 25 years from 2007. The Project's sponsors are Mubadala Development Company PJSC (Aa3 stable), Total SA (Aa1 stable) and Occidental Petroleum Corporation (A2 stable).

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

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