Exxon raises £7.58 billion to expand cash reserves while debt markets welcome new deals

Exxon Mobil Corp (NYSE:XOM) is committed to improving its financial stature as debt markets continue to welcome new deals. On Monday, the largest oil producer in the U.S said that it raised £7.58 billion in new debt.

Exxon also highlighted that the price to borrow was significantly lower as compared to what it paid for a debt deal around 4 weeks ago. Experts construed it as a hint that investor confidence is starting to recover after a Coronavirus driven collapse of the stock market and the price war between the world’s top two oil producers, Russia and Saudi Arabia.

Costs associated with borrowing, however, have not yet returned for Exxon to the pre-virus levels.

Exxon Had Originally Planned On Raising £7.18 Billion

Originally, Exxon had anticipated raising £7.18 billion. On Monday, however, it sold 5 different bonds to raise a higher £7.58 billion. The bonds durations varied from 5 years to up to 31 years.

Exxon’s deal on Monday priced £1.6 billion worth of 10.5-year bond at a premium of 185 basis points to the U.S Treasuries and a yield of 2.61%. In comparison, on March 17^th, the oil major had priced a 10-year bond worth £1.6 billion at a premium of 240 basis points to the U.S Treasuries and a yield of 3.482%.

In August 2019, Exxon had sold a 10-year bond worth £1.0 billion with a premium of 75 basis points to the U.S Treasuries and a 2.44% yield.

Owing to the rising Coronavirus uncertainty, U.S companies are increasingly approaching debt markets to stock up on cash and cushion the economic blow from the pandemic. As per the sources, Exxon’s move was also anchored in the company’s desire to further strengthen its financial stature while the debt markets is still welcoming new deals.

Exxon’s Performance In The Stock Market In 2020

The collapse of the stock market as well as that of the global oil prices has weighed heavily on Exxon. The company is currently trading 38.7% down year to date in the stock market. The broader S&P 500 index, on the other hand, has posted a narrower decline of around 14.5% so far in 2020.

Exxon, however, jumped around 7% in after-hours trading on Monday. But the gain was reported unsustainable as the oil major immediately lost back around 6%.

At the time of writing, Exxon is valued at £144 billion and has a price to earnings ratio of 13.43.