Exxon may face downgrading by Moody's amid bleak oil prices

Exxon Mobil Corp is expected to lose credit rating from Moody's Investors Service as it has lowered its outlook for Exxon from stable to negative. Continuous drop in oil prices and bleak prospects of rebound are affecting the cash flows of Exxon. The biggest crude producer has been holding top rating from Moody's for decades.

The adverse conditions in the global oil market are preventing oil majors such as Exxon Mobil to invest more in new discoveries. Exxon Mobil Corp is also suffering to cover debt payments. The Texas-based company's platinum credit rating gives its competitive edge over rivals in negotiations on exploration concessions. 

Bloomberg reports that Exxon Mobil Corp has been holding Moody's top Aaa rating for 90 years. Now, Moody's on Thursday lowered outlook from stable to negative. Standard & Poor's has also given a warning early this month that its own rating on Exxon's debt may also be in jeopardy.

Moody's Investors Service on February 25 lowered its ratings for Occidental Petroleum Corp, shale driller EOG Resources Inc, Marathon and Devon Energy Corp.

Moody's in a latest statement said "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 Exxon Mobil's reserve replacement and production profile in the latter part of this decade."

However, Moody's affirmed the triple A rating on Exxon Mobil Corp. It further said "our expectations of negative free cash flow and weak cash flow are based leverage metrics for ExxonMobil in 2016 and 2017."

Exxon Mobil's capital investment has been on decline for a long time. This could result in lower level of reserve replacement and production drop, as reported by Financial Times. 

Exxon Mobil's Chairman and Chief Executive Officer Rex Tillerson believes the "Company's platinum credit rating gives it an edge in competing with rival drillers when negotiating exploration concessions with oil-rich nations."

Global credit rating agencies have been downgrading several oil firms, drillers and explorers. Several oil firms have been slashing jobs and reducing investment in exploration to sustain in the market in the wake of continuous oil price drop. The downgrades for oil firms located in US shale fields to offshore Brazil have been announced by rating agencies, according to Yahoo Finance. 

Exxon Mobile has been in oil business from 1800s. In those days, kerosene was competing with whale oil as household lamp fuel. Exxon Mobil's annual revenues surpass some of nations' GDPs.

Saudi Arabia's latest statement that there wouldn't be any cut in production level would confirm the bleak prospects for rebound. Saudi Arabia accounts for about one-tenth of the world's oil supply. Ali al-Naimi, Oil Minister, Saudi Arabia, recently told the IHS CERAWeek conference in Houston that there won't be cutting output to boost the market.