ExxonMobil lost its AAA credit rating for the first time in more than 80 years. S&P downgraded the oil supermajor, which was one of only a few U.S. companies that had the highest possible rating.
S&P said that oil prices could remain low for the next few years, which would impair Exxon's cash flows. It also did not look favorably upon the oil company's decision to spend $54 billion on share buybacks over the past four years at a time that its debt levels increased. The crash in oil prices since mid-2014 only made things worse. Related: It Isn't Just ISIS that Is Destabilizing Iraq
Another problem for the company is that it has struggled to replace its oil reserves, only making new discoveries to replace 67 percent of the oil it produced in 2015. "In our view, the company's greatest business challenge is replacing its ongoing production," S&P said.
The ratings agency had put Exxon up for a credit review in February, and announced a downgrade to AA+ on April 26. There are only two other companies that have a AAA credit rating.
By Charles Kennedy of Oilprice.com
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