Chevron Corp. had its credit rating cut by Standard & Poor’s for the first time in almost three decades, the largest U.S. oil driller to face a downgrade so far amid the worst oil-market collapse in a generation. Exxon Mobil Corp. may be next.
In a sweeping downgrade of some of the biggest U.S. explorers, Chevron’s rating was reduced to AA- from AA, Hess Corp. was lowered to BBB- from BBB, and shale driller Continental Resources Inc. was cut to junk status, S&P said in a statement on Tuesday. EOG Resources Corp., Apache Corp., Devon Energy Corp. and Marathon Oil Corp. also were downgraded. Southwestern Energy Co. also was cut to junk status.
Exxon, one of just three U.S. corporations with S&P’s highest rating of AAA, was placed on credit watch with negative implications, according to the statement. Citing expectations that Exxon’s credit measures will remain weak through 2018, S&P said it’ll decide whether to downgrade the Irving, Texas-based company within 90 days. If it does cut the rating, it’ll probably only be by a single notch, S&P said.
For most of the oil industry, slashing drilling budgets and other cost-cutting “are insufficient to stem the meaningful deterioration expected in credit measures over the next few years,” S&P said in its statement.
Voice messages left with Exxon’s and Chevron’s media relations offices seeking comment weren’t immediately returned.
The ratings cuts were widely anticipated by oil executives as crude plummeted to prices not seen since the early 2000s, strangling companies of cash needed to fund drilling, pay dividends and service debts. ConocoPhillips, the third-largest U.S. oil explorer by market value, is also under review for possible downgrading, S&P said.
Continental and Southwestern have combined outstanding debts of $12.1 billion, according to data compiled by Bloomberg. The only other U.S. corporate issuers with AAA ratings aside from Exxon are Microsoft Corp. and Johnson & Johnson.