Moody's rates Tristan Oil note add-on B2

Moody's Investors Service said it affirmed Tristan Oil Ltd.'s corporate family rating and $300 million 10½% senior secured notes due 2012 at B2 and assigned a B2 rating to the company's proposed additional $120 million senior secured notes due 2012 issue, which is an extension of and has been consolidated into the existing senior secured notes issue.

The outlook was changed to negative from stable.

The agency said Tristan Oil's financial results remain broadly in line with its original expectations, primarily as a result of a good price environment. Oil production rates, however, remain constrained around 2006 levels until further approvals are granted during 2007. Capital expenditures are expected rise in 2007 in order to pursue the exploration of further wells to boost future cash flows from the company's two main fields.

The change in outlook is primarily premised on the heightened financial risk as a result of raising the proposed additional $120 million funding to accelerate exploration, Moody's said. Pro forma leverage on a total debt-to-EBITDA basis for 2006 is expected to rise to 3.5x from 2.8x.

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