S&P slashed Exxon’s credit rating to AA+, based on the fact that the company is being run by a bunch of asshats.
Let me explain the ways this company has shot itself in the foot.
Their oil fields are dying. Last year they only replaced 67% of lost oil production. Peak Exxon.
The company bought natural gas producer XTO Energy for $40 billion in 2009, the peak of natural gas. That company would be worth nothing today.
Retarded joint venture with Russian driller that resulted in a $1 billion loss.
And then there’s this: the company has wasted $54 billion in stock buybacks since 2012, as the companies debt more than doubled.
“The company’s debt level has more than doubled in recent years, reflecting high capital spending on major projects in a high commodity price environment and dividends and share repurchases that substantially exceeded internally generated cash flow,” S&P wrote in the note.
Exxon now has $34 billion in debt, declining production due to old wells, and a management team who thinks the best way to spend $54 billion is to buy its own stock.
Lazy fuckers.
The only two American companies left with a AAA rating is JNJ and MSFT.
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Crushed that blog post. Interesting note at end regarding JNJ and MSFT. That would probably surprise a few people; not necessarily who, but the quantity.
This is huge, thanks for staying on top of it. I had postulated that XOM would gobble up reserves at discount prices and would be a great stock for the long term. Maybe S&P knows something that we don’t.
However, perhaps we really have reached (or are reaching) peak oil *demand* on a global basis, which would mean oil price stay below $70 for the long term.
BTW, for those that don’t know, oil reserves are based on market prices – oil recoverable at market rates. So if oil rises, oil reserves will rise automatically even if no more oil is found. So the fact that Exxon hasn’t been able to replace it’s reserves is more a function of low oil prices than any slow down in discovery/exploration.