Exxon Raises $9.5 Billion In Yet Another Massive Bond Deal

Exxon Mobil (XOM), the US’s largest oil producer, has now raised $9.5 billion in new debt by selling five different bonds with durations of five years to 31 years. In a sign of strong investor demand, XOM raised $9.5 billion instead of the $9 billion originally intended.

Moreover, the company paid a lower price to borrow than it did in the $8.5 billion March deal. For instance, it now priced a 10.5-year bond worth $2 billion at a 185 basis-point premium to U.S. Treasuries with a 2.61% yield, whereas in March, Exxon sold $2 billion in debt with a 10-year duration where the premium to U.S. Treasuries was 240 basis points with a 3.482% yield.

However, this is still significantly higher than the company paid in August last year due to the current economic uncertainty.

Overall analysts are recommending investors stay on the sidelines when it comes to Exxon. The company has a Hold analyst consensus on TipRanks with a $51 average analyst price target. With shares down 49% year-to-date, the average price target stands at 20% above current levels. (See Exxon’s Stock Analysis on TipRanks)

“We see the company firmly on the back foot, and needing to limit the cash burn in the near term” wrote RBC Capital analyst Biraj Borkhataria on April 9. He marginally raised his XOM price target from $40 to $42 after the company slashed this year’s capital spending plans by $10 billion.

Most of the cut to capex is in the Permian basin, but one of XOM’s major projects, Mozambique LNG looks to have been deferred, while the later phases of Liza have also been pushed out.

Ultimately, Borkhataria maintained his sell rating on the stock. “Unfortunately, Exxon’s current efforts [to take advantage of the downturn] have been overrun by weaker macro, leaving it in a challenging position” he concluded.

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