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Rating Action:

Moody's rates ExxonMobil's new notes Aaa

13 Aug 2019

Proposed offering of fixed and floating rate senior notes of various maturities

New York, August 13, 2019 -- Moody's Investors Service (Moody's) assigned Aaa ratings to Exxon Mobil Corporation's (ExxonMobil) proposed offering of senior notes. The proceeds from the offering will be used to refinance outstanding commercial paper borrowings and for general corporate purposes. ExxonMobil's existing Aaa ratings and stable outlook are unchanged.

"ExxonMobil's negative free cash flow and rising debt levels in the first half of this year are pressuring its credit profile, particularly with oil prices averaging mid-cycle levels during the period," commented Pete Speer, Moody's Senior Vice President. "While this notes offering is refinancing some of the company's debt on a longer-term basis, the company retains ample flexibility to reduce debt through asset sales and strengthen its credit metrics."

Assignments:

..Issuer: Exxon Mobil Corporation

....Senior Unsecured Notes, Assigned Aaa

RATINGS RATIONALE

Weak earnings in ExxonMobil's downstream and chemicals businesses have led to higher negative free cash flow and a greater rise in debt in the first half of 2019 than Moody's anticipated. The corresponding deterioration in credit metrics is of particular concern given that oil prices, while volatile, were largely in line with our base assumption for the first half of the year and fell within middle of our medium term price band. Natural gas prices have been somewhat weaker than our assumptions, especially international prices. The company's pursuit of growth opportunities and correspondingly higher capital spending is outpacing its retained cash flow generation and pressuring its stable outlook and Aaa rating.

ExxonMobil's execution on its growth projects looks solid to date, with its growth in the Permian right on track with its guidance and Guyana progressing smoothly to first production early next year, if not sooner. The company has also targeted $15 billion of asset sales through 2021 which provide an additional source of funding for its growth capital spending. Although some of the asset sales should be realized in the second half of 2019, the bulk of the asset sales will be in 2020 and 2021. Given the potential for continued negative free cash flow and rising debt levels, it is important for ExxonMobil's Aaa rating that asset sale proceeds be used for debt reduction.

The Aaa rating for ExxonMobil reflects its differentially large proved reserve base, integrated operations that provide countercyclical cash flow benefits and 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. ExxonMobil's integrated business model provides resiliency in navigating volatile commodity prices, while its size and strong balance sheet enable it to maintain a relatively low cost structure and fund necessary capital investments through cycles to sustain its business profile.

Contrary to most of its peers, ExxonMobil has substantially increased its capital investment to pursue growth opportunities along its entire integrated value chain. This has the potential to greatly increase its earnings capacity relative to its present debt levels, and thereby strengthen its resilience to commodity price volatility over the medium to long term. However, this growth strategy entails project execution risk and the risk that weaker commodity prices or operating margins in its other businesses during this period of elevated investment weakens the company's credit profile, as demonstrated in the first half of 2019.

The Aaa rating could be downgraded because of continued negative free cash flow generation and rising debt levels caused by the high level of capital investment. Reserve replacement, production volumes or downstream and chemicals earnings capacity not growing in line with the company's guidance could also result in a ratings downgrade, as could large debt funded acquisitions or share repurchases.

The principal methodology used in these ratings was Global Integrated Oil & Gas Industry published in October 2016. 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 the world's largest publicly traded integrated oil & gas company by market capitalization.

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.
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