Exxon Mobil's Credit Ratings Downgraded

S&P has downgraded the oil giant's credit rating as the company was having difficulty in managing funds

For the first time ever in 70 years, Exxon Mobil Corp.’s top-tier credit rating has been slashed down by the Standard & Poor’s. The move was taken on Tuesday as the company is having difficulty in funding projects and expanding higher returns –in form of cash –to the shareholders due to the growing vortex of slumping crude prices.

McGraw Hill Financial Inc.’s unit S&P has brought down the oil giant’s prestigious “AAA” credit rating to “AA+” –this demotion has left tech giant, Microsoft Corporation and drug maker Johnson & Johnson have now become the only companies to have the prestigious rating which, back in 1980s, was enjoyed by a large number of U.S. companies.

The ratings for Exxon is still as high as the S&P has set for the U.S. government bonds –which is largely considered as the world’s safest investment. Also, two other U.S. companies –Apple Inc. and General Electric Co. –have “AA+” rating from S&P.

No major impact was recorded on the Exxon stock which closed at $87.63 after going up by 0.34%.

The Irving, Texas firm, along with other energy companies, has been under immense pressure to pay back the money to the shareholders. Over the last decade, the company has spent around $210 billion on share buy-back; additionally, during the fourth quarter, it paid $3.6 billion –which ended up to be more than what the company had earned -in the form of share repurchases and dividends.

In February, when oil prices declined and come to half, the company announced that it is going for the buy-back in order to balance the dilution contrary to the general action of returning cash to shareholders.

Nevertheless, S&P has expressed that the world’s largest publicly traded oil company’s debt level, during the recent years, had doubled chiefly due to the growth projects which include, Papa New Guinea based liquefied natural gas export facilities, along with other items including dividends, with an overall spending which is ahead of cash flow.

The oil giant in a statement made no indication about the response it is intending to give for S&P’s ratings. A spokesperson of Exxon Mobil, Scott Silvestri has said that the demotion hasn’t affected the company’s ability to efficiently manage its financials.

The company stated that it appreciates its strong credit position and will strongly focus on building long-term shareholder value irrespective of the volatility of oil market.

The current downgrade wasn’t taken by surprise. Earlier, S&P had downgraded rival Chevron Corporation, in February and had warned Exxon that something similar could be carried out for the company in the future.

The demotion was faced by the company as it defends the accusations against it saying that it kept the public and the investors in dark regarding the climate change risk.