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ExxonMobil raises $12bn in debt

01 Mar 2016 22:58 GMT
ExxonMobil raises $12bn in debt

Houston, 1 March (Argus) — ExxonMobil raised $12bn by selling bonds amid a plunge in crude prices that has put the major at risk of losing its top-notch credit rating.

The debt maturaties range from 2018 to 30 years from now, in 2046. The offering comes a year after the major raised $8bn in its largest ever bond offering in 2015.

The funds may be used for a wide range of purposes, including acquisitions, capital expenditures and refinancing other obligations, the company said in regulatory filings.

Analysts expect the major to possibly use part of the proceeds to fund an acquisition to sustain output growth in coming years as the plunge in the market makes valuations attractive. Details may be forthcoming when chairman Rex Tillerson addresses analysts and investors in the company's annual meeting tomorrow in New York.

"Nothing has happened, even though management seemed to be supporting M&A [mergers and acquisitions] at last year's meeting," Paul Sankey at Wolfe Research said. "Are we closer now with bid-ask spreads collapsing on the ask side? That will be the key question for this meeting."

As the oil market fell starting in mid-2014 to a near 13-year low below $30/bl, ExxonMobil responded by cutting its 2016 capital spending to $23bn from $31bn in 2015. Its planned spending this year is down by 40pc compared with 2014, the biggest cut among the majors so far.

ExxonMobil also replaced just 67pc of its reserves last year, its lowest rate in 22 years, as proven natural gas reserves were cut because of lower prices. The firm booked 1bn bl of oil equivalent (boe) of proven reserves in 2015, down from 1.5bn boe a year earlier. Proven natural gas reserves, primarily in the US, were reduced by 834mn boe.

The twin measures in part prompted Moody's to change its rating outlook on ExxonMobil to negative from stable, while it reaffirmed its AAA ratings on the company.

"While the company is cutting its capital spending and operating costs in response to lower commodity prices, this diminished level of capital reinvestment could adversely affect ExxonMobil's reserve replacement and production profile in the latter part of this decade," said Pete Speer, Moody's senior vice president as the rationale behind the change.

The major's annual profits fell by 50pc to $16.2bn in 2015 from $32.5bna year earlier, and upstream income fell to $7.1bn from $27.6bn a year earlier.

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