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
