New York, April 02, 2020 -- Moody's Investors Service, ("Moody's") downgraded
Exxon Mobil Corporation's (ExxonMobil) and its guaranteed subsidiaries'
issuer and senior unsecured ratings to Aa1 from Aaa. Moody's
affirmed the company's Prime-1 short term ratings.
The rating outlook remains negative.
"ExxonMobil was generating negative free cash flow and weakly positioned
within its Aaa rating prior to the collapse in oil prices,"
commented Pete Speer, Moody's Senior Vice President.
"While we expect the company to reduce capital spending and operating
costs, continued negative free cash flow and rising debt levels
even in a recovery raises the risk of a further downgrade to its ratings."
RATINGS RATIONALE
ExxonMobil's cash flow based credit metrics were already relatively
weak entering 2020, as very high growth capital investment combined
with muted oil and gas prices and low downstream and chemicals earnings
resulted in substantial negative free cash flow and rising debt in 2019.
The large drop in oil prices and continued weakness in downstream and
chemicals performance leaves the company poised to incur sizable negative
free cash flow funded with debt. ExxonMobil has indicated that
it is contemplating significant reductions in capital spending and operating
expenses, which will help reduce negative free cash flow but the
specific details of those actions are yet to be announced. As oil
prices and the industry recovers, Moody's does not expect
ExxonMobil's metrics to improve sufficiently to regain a Aaa rating
over the medium term. Even with large cuts in costs and investments,
the company's negative free cash flow generation and debt increases,
particularly under Moody's low commodity price case, which
could weaken ExxonMobil's credit profile and result in a ratings
downgrade.
The rapid and widening spread of the coronavirus outbreak, deteriorating
global economic outlook, falling oil prices, and asset price
declines are creating a severe and extensive credit shock across many
sectors, regions and markets. The combined credit effects
of these developments are unprecedented. The integrated oil and
gas sector will be one of the sectors most significantly affected by the
shock given its sensitivity to demand and oil prices. ExxonMobil
will remain vulnerable to the outbreak continuing to spread and weakness
in oil prices, refined products and chemicals demand. We
regard the coronavirus outbreak as a social risk under our ESG framework,
given the substantial implications for public health and safety.
Today's action reflects the impact on ExxonMobil's credit quality,
the breadth and severity of the oil demand and supply shocks, and
the broad deterioration in credit quality it has triggered.
In addition to the near-term concerns regarding the coronavirus
demand shock and rising OPEC+ supply on oil prices, 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.
Exxon's Aa1 rating reflects its large proved reserve base relative
to peers and integrated operations that provide countercyclical cash flow
benefits and the ability to capture value across the hydrocarbon chain.
The company is one of the world's largest petroleum refiners and petrochemical
producers. ExxonMobil's financial leverage as measured against
proved reserves and book capitalization measures remains relatively low
and the company has lowered its operating cost and reserve replacement
cost structure while expanding its short cycle investment opportunities
in the Permian Basin of Texas and New Mexico that it can more readily
adjust in response to commodity prices.
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. Other 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 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.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
ExxonMobil's ratings could be downgraded if higher debt levels accumulated
during this period of low commodity prices are unlikely to get reversed
over the medium term through asset sales and free cash flow generation
when oil prices recover.
If the company is able to reduce capital spending and operating costs
while also executing asset sales sufficient that its metrics will recover
then the outlook could be changed to stable. A rating upgrade is
unlikely given the very negative industry conditions. In order
to consider a ratings upgrade, ExxonMobil would have to substantially
reduce its debt levels and manage its growth investments in a manner that
strengthens the company's resilience to heightened commodity price
volatility given the longer term uncertainties arising from energy transition.
The principal methodology used in these ratings was Integrated Oil and
Gas Methodology published in September 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1172345.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Downgrades:
..Issuer: California Municipal Finance Authority
....Senior Unsecured Revenue Bonds,
Downgraded to Aa1 from Aaa
..Issuer: California Pollution Control Financing Auth.
....Senior Unsecured Revenue Bonds,
Downgraded to Aa1 from Aaa
..Issuer: East Baton Rouge (Parish of) LA
....Senior Unsecured Revenue Bonds,
Downgraded to Aa1 from Aaa
..Issuer: East Baton Rouge (Parish of) LA, Ind
Dev Bd
....Senior Unsecured Revenue Bonds,
Downgraded to Aa1 from Aaa
..Issuer: Exxon Capital Corp.
....Senior Unsecured Shelf, Downgraded
to (P)Aa1 from (P)Aaa
..Issuer: Exxon Mobil Corporation
.... Issuer Rating, Downgraded to Aa1
from Aaa
....Senior Unsecured Notes, Downgraded
to Aa1 from Aaa
....Senior Unsecured Shelf, Downgraded
to (P)Aa1 from (P)Aaa
..Issuer: Gloucester (Cnty of) NJ, Poll Ctrl
Fin Auth
....Senior Unsecured Revenue Bonds,
Downgraded to Aa1 from Aaa
..Issuer: Gulf Coast Industrial Development Authority
....Senior Unsecured Revenue Bonds,
Downgraded to Aa1 from Aaa
..Issuer: Gulf Coast Waste Disposal Authority,
TX
....Senior Unsecured Revenue Bonds,
Downgraded to Aa1 from Aaa
..Issuer: Harris County Industrial Dev Corp,
TX
....Senior Unsecured Revenue Bonds,
Downgraded to Aa1 from Aaa
..Issuer: Joliet Regional Port District, IL
....Senior Unsecured Revenue Bonds,
Downgraded to Aa1 from Aaa
..Issuer: Lincoln (County of) WY
....Senior Unsecured Revenue Bonds,
Downgraded to Aa1 from Aaa
..Issuer: Lower Neches Valley Auth. TX,
I.D.C.
....Senior Unsecured Revenue Bonds,
Downgraded to Aa1 from Aaa
..Issuer: Lower Neches Valley Authority, TX
....Senior Unsecured Revenue Bonds,
Downgraded to Aa1 from Aaa
..Issuer: Mobil Corporation
.... Issuer Rating, Downgraded to Aa1
from Aaa
....Senior Unsecured Notes, Downgraded
to Aa1 from Aaa
..Issuer: MOBILE (COUNTY OF) AL
....Senior Unsecured Revenue Bonds,
Downgraded to Aa1 from Aaa
..Issuer: New Jersey Economic Development Authority
....Senior Unsecured Revenue Bonds,
Downgraded to Aa1 from Aaa
..Issuer: Rhode Island Industrial Facilities Corp.
....Senior Unsecured Revenue Bonds,
Downgraded to Aa1 from Aaa
..Issuer: Saint Bernard (Parish of) LA
....Senior Unsecured Revenue Bonds,
Downgraded to Aa1 from Aaa
..Issuer: Sublette (County of) WY
....Senior Unsecured Revenue Bonds,
Downgraded to Aa1 from Aaa
..Issuer: Union (Cnty of) NJ, Poll. Control
Fin. Auth.
....Senior Unsecured Revenue Bonds,
Downgraded to Aa1 from Aaa
..Issuer: Union (County of) NJ, Ind Poll Ctrl
Fin Auth
....Senior Unsecured Revenue Bonds,
Downgraded to Aa1 from Aaa
..Issuer: Valdez (City of) AK
....Senior Unsecured Revenue Bonds,
Downgraded to Aa1 from Aaa
..Issuer: Will (County of) IL
....Senior Unsecured Revenue Bonds,
Downgraded to Aa1 from Aaa
..Issuer: XTO Energy, Inc.
.... Issuer Rating, Downgraded to Aa1
from Aaa
....Senior Unsecured Notes, Downgraded
to Aa1 from Aaa
Outlook Actions:
..Issuer: Exxon Capital Corp.
....Outlook, Remains Negative
..Issuer: Exxon Mobil Corporation
....Outlook, Remains Negative
..Issuer: Mobil Corporation
....Outlook, Remains Negative
..Issuer: XTO Energy, Inc.
....Outlook, Remains Negative
Affirmations:
..Issuer: California Municipal Finance Authority
....Senior Unsecured Revenue Bonds,
Affirmed VMIG 1
..Issuer: California Pollution Control Financing Auth.
....Senior Unsecured Revenue Bonds,
Affirmed VMIG 1
..Issuer: East Baton Rouge (Parish of) LA
....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 P-1
..Issuer: Exxon Mobil Corporation
....Commercial Paper, Affirmed P-1
..Issuer: Gloucester (Cnty of) NJ, Poll Ctrl
Fin Auth
....Senior Unsecured Revenue Bonds,
Affirmed VMIG 1
..Issuer: Gulf Coast Industrial Development Authority
....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 VMIG 1
..Issuer: Harris County Industrial Dev Corp,
TX
....Senior Unsecured Revenue Bonds,
Affirmed VMIG 1
..Issuer: Joliet Regional Port District, IL
....Senior Unsecured Revenue Bonds,
Affirmed P-1
..Issuer: Lincoln (County of) WY
....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 VMIG 1
..Issuer: Lower Neches Valley Authority, TX
....Senior Unsecured Revenue Bonds,
Affirmed VMIG 1
..Issuer: MOBILE (COUNTY OF) AL
....Senior Unsecured Revenue Bonds,
Affirmed VMIG 1
..Issuer: New Jersey Economic Development Authority
....Senior Unsecured Revenue Bonds,
Affirmed P-1
..Issuer: Rhode Island Industrial Facilities Corp.
....Senior Unsecured Revenue Bonds,
Affirmed VMIG 1
..Issuer: Saint Bernard (Parish of) LA
....Senior Unsecured Revenue Bonds,
Affirmed VMIG 1
..Issuer: Sublette (County of) WY
....Senior Unsecured Revenue Bonds,
Affirmed P-1
..Issuer: Union (Cnty of) NJ, Poll. Control
Fin. Auth.
....Senior Unsecured Revenue Bonds,
Affirmed VMIG 1
..Issuer: Union (County of) NJ, Ind Poll Ctrl
Fin Auth
....Senior Unsecured Revenue Bonds,
Affirmed VMIG 1
..Issuer: Valdez (City of) AK
....Senior Unsecured Revenue Bonds,
Affirmed P-1
....Senior Unsecured Revenue Bonds,
Affirmed VMIG 1
..Issuer: Will (County of) IL
....Senior Unsecured Revenue Bonds,
Affirmed VMIG 1
Exxon Mobil Corporation is headquartered in Irving, Texas and is
one of the world's largest integrated oil & gas companies.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
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.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
At least one ESG consideration was material to the credit rating outcome
announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
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
