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Rating Action:

Moody's changes ExxonMobil's outlook to negative

19 Nov 2019

New York, November 19, 2019 -- Moody's Investors Service (Moody's) changed Exxon Mobil Corporation's (ExxonMobil) outlook to negative from stable. Moody's affirmed the company's and its guaranteed subsidiaries' Aaa issuer and senior unsecured ratings as well as its P-1 short term ratings.

"ExxonMobil's negative outlook reflects the company's substantial negative free cash flow and expected reliance on debt to fund its large growth capital spending program," commented Pete Speer, Moody's Senior Vice President. "We forecast debt to rise, despite some potential mitigation from asset sales, causing ExxonMobil's credit metrics to weaken for the next few years."

RATINGS RATIONALE

Moody's forecasts that ExxonMobil's negative free cash flow will be around $7 billion in 2019 and $9 billion in 2020. These forecasts reflect a Brent oil price assumption of $60 per barrel and some earnings growth in downstream and chemicals in 2020 but margins that remain cyclically weak, particularly in chemicals. Negative free cash flow is likely to continue in 2021, with the company's debt levels rising materially even if the company achieves it targeted asset sales of $15 billion over the period. The company's high level of growth capital investments cannot be funded with operating cash flow and asset sales at projected levels given ExxonMobil's substantial dividend payout, absent meaningfully higher commodity prices and earnings from downstream and chemicals.

The affirmation of ExxonMobil's Aaa rating reflects management credibility and track record on growth project execution. The company's Permian production volumes are rising in line with its guidance and the Guyana development looks to start initial production this December, with both assets continuing to grow production through 2025. The company is also expanding its LNG business, chemicals production capacity and is making targeted expansions in refining and marketing. ExxonMobil benefits from its differentially large proved reserves base, integrated operations that provide countercyclical cash flow benefits and still low financial leverage as measured against proved reserves and book capitalization measures. The company's proved reserves are much larger than its Aa-rated integrated peers, while it is also one of the world's largest petroleum refiners and petrochemical producers. This scale allows the company to align its cost structure with commodity prices and capture value across its integrated value chain.

Environmental considerations incorporated into our credit analysis for ExxonMobil are primarily related to potential carbon dioxide regulations, but also include natural and man-made hazards. Social risks are primarily related to demographic and societal trends and responsible production. These risks could influence regional moves towards less carbon-intensive sources of energy, which could reduce demand for oil, gas and refined products. ExxonMobil is exposed to rising litigation risk, which is an event risk related to climate change and related disclosures. Future laws and regulations that could accelerate the pace of energy transition or changes in technology that affect demand for hydrocarbons represent a material and growing risk for the company. These risks also add to corporate governance considerations with respect to financial strategy and risk management. A strong financial position and low financial leverage are important characteristics for managing these environmental and social risks.

The negative outlook incorporates Moody's expectation for weakening credit metrics that could result in a downgrade in 2020. The negative outlook also reflects the emerging threat to oil and gas companies' profitability and cash flow from growing efforts by many nations to mitigate the impacts of climate change through tax and regulatory policies that are intended to shift global demand towards other sources of energy or conservation. Failure to achieve reserve replacement, production volumes or downstream and chemicals earnings capacity growth in line with the company's guidance could also result in a rating downgrade, as could large debt funded acquisitions or share repurchases.

In order for ExxonMobil's outlook to return to stable, the company would have to successfully execute its capital program while limiting increases in debt. Production volume growth and increased downstream refining and chemicals production capacity could strengthen its business profile and make the company more resilient to periods of weak commodity prices, supporting its Aaa rating.

Outlook Actions:

..Issuer: Exxon Capital Corp.

....Outlook, Changed To Negative From Stable

..Issuer: Exxon Mobil Corporation

....Outlook, Changed To Negative From Stable

..Issuer: Mobil Corporation

....Outlook, Changed To Negative From Stable

..Issuer: XTO Energy, Inc.

....Outlook, Changed To Negative From Stable

Affirmations:

..Issuer: California Municipal Finance Authority

....Senior Unsecured Revenue Bonds, Affirmed Aaa

....Senior Unsecured Revenue Bonds, Affirmed VMIG 1

..Issuer: California Pollution Control Financing Auth.

....Senior Unsecured Revenue Bonds, Affirmed Aaa

....Senior Unsecured Revenue Bonds, Affirmed VMIG 1

..Issuer: East Baton Rouge (Parish of) LA

....Senior Unsecured Revenue Bonds, Affirmed Aaa

....Senior Unsecured Revenue Bonds, Affirmed P-1

....Senior Unsecured Revenue Bonds, Affirmed VMIG 1

..Issuer: East Baton Rouge (Parish of) LA, Ind Dev Bd

....Senior Unsecured Revenue Bonds, Affirmed Aaa

....Senior Unsecured Revenue Bonds, Affirmed P-1

..Issuer: Exxon Capital Corp.

....Senior Unsecured Shelf, Affirmed (P)Aaa

..Issuer: Exxon Mobil Corporation

.... Issuer Rating, Affirmed Aaa

....Senior Unsecured Commercial Paper, Affirmed P-1

....Senior Unsecured Notes, Affirmed Aaa

..Issuer: Gloucester (Cnty of) NJ, Poll Ctrl Fin Auth

....Senior Unsecured Revenue Bonds, Affirmed Aaa

....Senior Unsecured Revenue Bonds, Affirmed VMIG 1

..Issuer: Gulf Coast Industrial Development Authority

....Senior Unsecured Revenue Bonds, Affirmed Aaa

....Senior Unsecured Revenue Bonds, Affirmed VMIG 1

..Issuer: Gulf Coast Waste Disposal Authority, TX

....Senior Unsecured Revenue Bonds, Affirmed P-1

....Senior Unsecured Revenue Bonds, Affirmed Aaa

....Senior Unsecured Revenue Bonds, Affirmed VMIG 1

..Issuer: Harris County Industrial Dev Corp, TX

....Senior Unsecured Revenue Bonds, Affirmed Aaa

....Senior Unsecured Revenue Bonds, Affirmed VMIG 1

..Issuer: Joliet Regional Port District, IL

....Senior Unsecured Revenue Bonds, Affirmed Aaa

....Senior Unsecured Revenue Bonds, Affirmed P-1

..Issuer: Lincoln (County of) WY

....Senior Unsecured Revenue Bonds, Affirmed Aaa

....Senior Unsecured Revenue Bonds, Affirmed P-1

..Issuer: Lower Neches Valley Auth. TX, I.D.C.

....Senior Unsecured Revenue Bonds, Affirmed P-1

....Senior Unsecured Revenue Bonds, Affirmed Aaa

....Senior Unsecured Revenue Bonds, Affirmed VMIG 1

..Issuer: Lower Neches Valley Authority, TX

....Senior Unsecured Revenue Bonds, Affirmed Aaa

....Senior Unsecured Revenue Bonds, Affirmed VMIG 1

..Issuer: Mobil Corporation

.... Issuer Rating, Affirmed Aaa

....Senior Unsecured Notes, Affirmed Aaa

..Issuer: MOBILE (COUNTY OF) AL

....Senior Unsecured Revenue Bonds, Affirmed Aaa

....Senior Unsecured Revenue Bonds, Affirmed VMIG 1

..Issuer: New Jersey Economic Development Authority

....Senior Unsecured Revenue Bonds, Affirmed Aaa

....Senior Unsecured Revenue Bonds, Affirmed P-1

..Issuer: Rhode Island Industrial Facilities Corp.

....Senior Unsecured Revenue Bonds, Affirmed Aaa

....Senior Unsecured Revenue Bonds, Affirmed VMIG 1

..Issuer: Saint Bernard (Parish of) LA

....Senior Unsecured Revenue Bonds, Affirmed Aaa

....Senior Unsecured Revenue Bonds, Affirmed VMIG 1

..Issuer: Sublette (County of) WY

....Senior Unsecured Revenue Bonds, Affirmed Aaa

....Senior Unsecured Revenue Bonds, Affirmed P-1

..Issuer: Union (Cnty of) NJ, Poll. Control Fin. Auth.

....Senior Unsecured Revenue Bonds, Affirmed Aaa

....Senior Unsecured Revenue Bonds, Affirmed VMIG 1

..Issuer: Union (County of) NJ, Ind Poll Ctrl Fin Auth

....Senior Unsecured Revenue Bonds, Affirmed Aaa

....Senior Unsecured Revenue Bonds, Affirmed VMIG 1

..Issuer: Valdez (City of) AK

....Senior Unsecured Revenue Bonds, Affirmed P-1

....Senior Unsecured Revenue Bonds, Affirmed Aaa

....Senior Unsecured Revenue Bonds, Affirmed VMIG 1

..Issuer: Will (County of) IL

....Senior Unsecured Revenue Bonds, Affirmed Aaa

....Senior Unsecured Revenue Bonds, Affirmed VMIG 1

..Issuer: XTO Energy, Inc.

.... Issuer Rating, Affirmed Aaa

....Senior Unsecured Notes, Affirmed Aaa

The principal methodology used in these ratings was Integrated Oil and Gas Methodology published in September 2019. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Exxon Mobil Corporation is headquartered in Irving, Texas and is one of the world's largest integrated oil & gas companies.

REGULATORY DISCLOSURES

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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 certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain 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.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Peter Speer
Senior Vice President
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Steven Wood
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating, agreed to pay to Moody’s Investors Service, Inc. for ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and MIS also maintain policies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”

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