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Rating Action:

Moody's downgrades ExxonMobil to Aa2; outlook stable

23 Mar 2021

New York, March 23, 2021 -- Moody's Investors Service, ("Moody's") downgraded Exxon Mobil Corporation's (ExxonMobil) and its guaranteed subsidiaries' issuer and senior unsecured ratings to Aa2 from Aa1. Moody's affirmed the company's Prime-1 short term ratings. The rating outlook changed to stable from negative.

"ExxonMobil's large increase in debt in 2020 and accompanying deterioration in financial leverage metrics following the onset of the coronavirus pandemic looks unlikely to be fully reversed in the next few years," said Pete Speer, Moody's Senior Vice President. "The company is prioritizing debt reduction through capital spending restraint and free cash flow generation going forward, but by maintaining its large dividend the progress will be slow and subject to the uncertainties regarding commodity prices, downstream earnings recovery and asset sales."

RATINGS RATIONALE

The coronavirus pandemic induced collapse of oil prices and downstream refining earnings led to a large drop in cash flow for ExxonMobil that well exceeded the company's cuts in capital spending and operating costs. With the company maintaining its dividend, negative free cash flow exceeded $17 billion and reported debt increased by almost $21 billion in 2020, or over 40%. ExxonMobil will continue to reduce costs and capital spending in 2021 and has guided to continued restraint in capital spending in 2022 through 2025. Management has prioritized improving the company's earnings power with a lower cost structure, sustaining its dividend, and generating excess cash flow to reduce debt to strengthen its financial position. Under Moody's oil price assumptions and expectations for a gradual recovery in downstream and chemicals earnings to mid-cycle levels in 2022, ExxonMobil's free cash flow generation will be limited and therefore debt reduction will primarily be driven by asset sales. Even if oil prices were to be sustained in the $60 to $65 per barrel Brent range, Moody's forecasts the company's debt levels to remain well above 2019 levels at the end of 2022.

The downgrade to Aa2 and stable outlook incorporates Moody's expectations for meaningful debt reduction through 2022 and that ExxonMobil will continue to prioritize a strong balance sheet and lowering its cash flow breakeven through 2025 as outlined in its medium term plans. The company's ability to fully cover its dividend and capital investments necessary to maintain its competitiveness while generating free cash flow at progressively lower commodity prices is important for sustaining its Aa2 rating. A lower cost structure and a stronger financial profile are necessary to increase its resilience for navigating the inherent volatility of the business, and that volatility and uncertainty will rise over the medium to long term 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.

ExxonMobil's Aa2 rating is supported its very large scale and global diversification across a fully integrated hydrocarbon value chain. Its upstream production and proved reserves base remain large relative to peers and the company benefits from a strong position in liquified natural gas. The company has lowered its operating and reserve replacement cost structure and benefits from a large scale development in Guyana that has very competitive break-even costs while enhancing its short cycle and more flexible investment opportunities in the Permian Basin of Texas and New Mexico. ExxonMobil is one of the world's largest petroleum refiners and petrochemical producers. The company's debt levels have significantly increased since 2018, but its financial leverage as measured against proved reserves and book capitalization measures remains relatively low compared to most of its major oil company peers and Moody's expects debt to meaningfully decline over the next several years thereby improving financial leverage metrics.

Environmental considerations incorporated in our updated credit assessment of ExxonMobil consider an increased likelihood of changes in regulations and tax policies to contain carbon dioxide emissions. Moody's particularly sees a higher likelihood of meaningful policy shifts in Europe and the US, which together represent a substantial share of global economic output and oil and gas demand. Social risk considerations 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 would 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 industry. 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 Aa2 rating could be downgraded if the company does not meaningfully reduce debt through free cash flow and asset sales, or significantly increases dividends or share repurchases prior to reducing debt and substantially strengthening its leverage metrics. If Retained Cash Flow/Net Debt does not sustainably rise above 30% at mid-cycle commodity prices and downstream and chemicals earnings, then the rating could be downgraded.

A rating upgrade is unlikely given the expected pace of debt reduction and industry recovery necessary to solidify ExxonMobil in its current ratings. In order to consider a ratings upgrade, ExxonMobil would have to greatly reduce its debt and establish more scale and profitability in its low carbon solutions business to strengthen the company's resilience given the longer term uncertainties arising from increased regulation and energy transition. The company sustaining Retained Cash Flow/Net Debt above 45% at mid-cycle commodity prices and downstream and chemicals earnings could be supportive of an upgrade.

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

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 Aa2 from Aa1

..Issuer: California Pollution Control Financing Auth.

....Senior Unsecured Revenue Bonds, Downgraded to Aa2 from Aa1

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

....Senior Unsecured Revenue Bonds, Downgraded to Aa2 from Aa1

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

....Senior Unsecured Revenue Bonds, Downgraded to Aa2 from Aa1

..Issuer: Exxon Capital Corp.

....Senior Unsecured Shelf, Downgraded to (P)Aa2 from (P)Aa1

..Issuer: Exxon Mobil Corporation

.... Issuer Rating, Downgraded to Aa2 from Aa1

....Senior Unsecured Notes, Downgraded to Aa2 from Aa1

....Senior Unsecured Shelf , Downgraded to (P)Aa2 from (P)Aa1

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

....Senior Unsecured Revenue Bonds, Downgraded to Aa2 from Aa1

..Issuer: Gulf Coast Industrial Development Authority

....Senior Unsecured Revenue Bonds, Downgraded to Aa2 from Aa1

..Issuer: Gulf Coast Waste Disposal Authority, TX

....Senior Unsecured Revenue Bonds, Downgraded to Aa2 from Aa1

..Issuer: Harris County Industrial Dev Corp, TX

....Senior Unsecured Revenue Bonds, Downgraded to Aa2 from Aa1

..Issuer: Joliet Regional Port District, IL

....Senior Unsecured Revenue Bonds, Downgraded to Aa2 from Aa1

..Issuer: Lincoln (County of) WY

....Senior Unsecured Revenue Bonds, Downgraded to Aa2 from Aa1

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

....Senior Unsecured Revenue Bonds, Downgraded to Aa2 from Aa1

..Issuer: Lower Neches Valley Authority, TX

....Senior Unsecured Revenue Bonds, Downgraded to Aa2 from Aa1

..Issuer: Mobil Corporation

.... Issuer Rating, Downgraded to Aa2 from Aa1

....Senior Unsecured Notes, Downgraded to Aa2 from Aa1

..Issuer: MOBILE (COUNTY OF) AL

....Senior Unsecured Revenue Bonds, Downgraded to Aa2 from Aa1

..Issuer: NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY

....Senior Unsecured Revenue Bonds, Downgraded to Aa2 from Aa1

..Issuer: Rhode Island Industrial Facilities Corp.

....Senior Unsecured Revenue Bonds, Downgraded to Aa2 from Aa1

..Issuer: Saint Bernard (Parish of) LA

....Senior Unsecured Revenue Bonds, Downgraded to Aa2 from Aa1

..Issuer: Sublette (County of) WY

....Senior Unsecured Revenue Bonds, Downgraded to Aa2 from Aa1

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

....Senior Unsecured Revenue Bonds, Downgraded to Aa2 from Aa1

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

....Senior Unsecured Revenue Bonds, Downgraded to Aa2 from Aa1

..Issuer: Valdez (City of) AK

....Senior Unsecured Revenue Bonds, Downgraded to Aa2 from Aa1

..Issuer: Will (County of) IL

....Senior Unsecured Revenue Bonds, Downgraded to Aa2 from Aa1

..Issuer: XTO Energy, Inc.

.... Issuer Rating, Downgraded to Aa2 from Aa1

....Senior Unsecured Notes, Downgraded to Aa2 from Aa1

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

Outlook Actions:

..Issuer: Exxon Capital Corp.

....Outlook, Changed To Stable From Negative

..Issuer: Exxon Mobil Corporation

....Outlook, Changed To Stable From Negative

..Issuer: Mobil Corporation

....Outlook, Changed To Stable From Negative

..Issuer: XTO Energy, Inc.

....Outlook, Changed To Stable From Negative

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_1243406.

At least one ESG consideration was material to the credit rating action(s) 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.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK 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

No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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