The rating on KNOC reflects strong government support, the strategic importance of KNOC's role to the Korean government and economy, and the company's strong financial flexibility. The rating is constrained by the relatively large capital expenditures planned through 2009, and possible fluctuations in profit and cash flow from the expansion of the E&P business, which has higher risk attributes than the rest of KNOC's business segments. KNOC is a 100% government-owned upstream oil company, established in 1979 following the second oil shock to ensure the stable supply of oil to the Korean economy. The company is the execution arm of the Korean government with regard to oil policy matters and is regulated closely by the Ministry of Commerce, Industry and
