Integrated energy companies’ credit ratings
In this part, we’ll compare integrated energy companies’ credit ratings. We’ll look at Standard & Poor’s long-term credit ratings for ExxonMobil (XOM), Chevron (CVX), Royal Dutch Shell (RDS.A), and BP (BP).
ExxonMobil’s credit rating outlook downgraded
ExxonMobil (XOM) has a long-term credit rating of “AA+,” the highest among peers. However, in 2Q17, Standard & Poor’s downgraded XOM’s outlook from stable to negative, stating that “the negative outlook reflects financial leverage that is high for the current rating, as well as the potential for a downgrade if we no longer expect credit measures to improve over the next two years.”
According to S&P Global Ratings credit analyst Carin Dehne-Kiley, “The outlook revision reflects our revised cash flow projections for 2017 through 2019, which result in higher-than-previously expected leverage during the forecast period.” She added that “although ExxonMobil significantly reduced capital spending in 2015 and 2016 in response to lower commodity prices, it continued to grow dividends, leading to large discretionary cash flow deficits, and an uptick in debt.” In April 2016, ExxonMobil lost its valuable “AAA” rating, which it had held for almost 15 years.
Credit ratings of CVX, Shell, and BP
While Shell and BP have lower ratings than CVX, their outlook is better. Like XOM, Chevron has a negative outlook with an “AA-” credit rating.
BP has an “A-” rating with a stable outlook, and Shell has an “A” rating with a positive outlook. A positive outlook for Shell indicates that its rating may be upgraded. The rise in ratings could be due to likely synergies and benefits from the integration of BG Group.