OIL: Companies move to limit damage of sinking crude prices

 * Exxon Mobil and Shell best poised for turnaround *

The 50% drop in crude oil prices since mid-2014 will result in negative free cash flow for the international oil companies (IOCs) in 2015, which are responding with capital spending cuts and other measures to preserve flexibility, Moody's Investors Service said, adding, however, that the IOCs have strong balance sheets to help them weather the impact of increased leverage.

"While the fundamental business conditions in the industry have turned negative, we have not taken any negative rating actions on the IOCs, as they all have ample access to capital and low financial leverage going into the downturn, which is buoying their credit profiles," said Thomas Coleman, author of the report.
In Moody's view, Exxon Mobil Corporation (Aaa stable) and Royal Dutch Shell Plc (Aa1 stable) are the best positioned to deal with the downturn, as both companies had already entered a lower spending phase, with major projects reaching completion and coming on stream over the next two years.
In contrast, Chevron Corporation (Aa1 stable) and TOTAL S.A. ((P)Aa1 stable) are both still in large project spending cycles and are likely to see large debt increases in 2015. Chevron is well placed to absorb debt increases on account of its very low leverage and conservative financial policies. TOTAL is more weakly positioned, with high capital spending and dependence on asset sales to see it through 2015-16.
In its report, Moody's notes that while Macondo liabilities still drive its lower credit rating, BP p.l.c. (A2 negative) has a strong balance sheet and cash liquidity, and is taking major steps to hold the line on leverage and preserve its financial flexibility.