S&P Strips Exxon Mobil Of Its AAA Rating As Low Oil Price, High Spending Weigh

Standard & Poor's on Tuesday downgraded ratings on Exxon Mobil Corp. to AA-plus from AAA, stripping the oil giant of its pristine rating. The outlook is stable, meaning S&P does not expect to move on the rating again in the near term. S&P had placed the rating on CreditWatch negative in February in the face of persistent low oil prices. "We believe Exxon Mobil's credit measures will be weak for our expectations for a 'AAA' rating due, in part, to low commodity prices, high reinvestment requirements, and large dividend payments," S&P said in a statement. Exxon has more than doubled its debt burden in recent years as it has spent heavily on major projects and made dividend payments and share repurchases "that substantially exceeded internally generated cash flow." The company has sharply cut its capital spending and is expected to benefit from near-term production gains as some of the projects reach completion. However, maintaining production and replacing reserves will require higher spending, said the agency. Shares were slightly higher in midmorning trade, but are up 12% in the year so far, while the Dow Jones Industrial Average is up about 3%.