S&P downgrades oil companies' credit ratings

Standard & Poor’s has downgraded the credit ratings and outlooks for 13 oil companies amid the plunge in crude prices and said it’s reviewing ExxonMobil and ConcoPhillips.

The actions came despite recent announcements of big capital spending cuts by some of the largest producers in recent weeks.

“While oil prices deteriorated over the past 15 months, the U.S.-based investment-grade companies we rate had been largely immune to downgrades,” S&P said in a release. “However, given the magnitude of the recent reductions in our price deck, most of the investment-grade companies were affected during this review.”

The U.S. benchmark oil price is down more than 70% since its summer 2014 peak, including a roughly 19% drop so far this year.

“This price slump has been worse and lasted longer” than other recent downturns, S&P analyst Ben Tsocanos says.

S&P said the companies’ spending cuts “for the most part, are insufficient to stem the meaningful deterioration expected in credit measures over the next few years.” It noted the firms generally are maintaining their dividend payments. .

ExxonMobil and Chevron, the top two U.S. producers, each said it will slash 2016 capital outlays by about 25%. Still, S&P downgraded Chevron’s rating to AA- from AA.

“We anticipate Chevron will significantly outspend internally generated cash flow to fund major project capital spending and dividends this year and generate little cash available for debt reduction over the following two years,” S&P said.

The company has said it plans $26.6 billion in capital outlays this year.

S&P didn’t lower its AAA rating for Exxon Mobil but said it’s placing it on its “creditwatch” while it reviews the ranking over the next 90 days. Any downgrade would not be lower than one notch, the ratings firm said. The oil giant said it plans to spend $23.2 billion on capital projects this year and is maintaining its dividend but suspending stock buybacks in the first quarter.

Among other oil companies whose ratings S&P downgraded were Hess, Marathon Oil, Devon Energy, Continental Resources, and Southwestern Energy. The firm also lowered its outlook for Anadarko Petroleum, Noble Energy and National Fuel Gas.

ExxonMobil this week reported a 58% drop in fourth-quarter earnings while BP posted a $3.3 billion loss. Chevron last week said it lost $588 million last quarter, its first quarterly deficit in 13 years.