VWDRY - Why Debt is a Bigger Problem for ExxonMobil Than It Might Seem
ExxonMobil (NYSE: XOM) used to be one of the most profitable companies in the world. At one point, it was an investor's best friend, producing consistent positive growth. In years past, it has been anything but. Over the past five years, the stock is down approximately 32% and down 15% over the past year. Its stock currently trades around $67.50.
Too often, investors look at a company's balance sheet, see that its long-term debt is just a fraction of its total assets, and infer that it's financially sound. Chances are, they're correct, but it can't hurt for investors to better understand the structure of its debt to be sure.
ExxonMobil issued $7 billion of both floating and fixed-rate notes on August 14. The company plans to use the net proceeds of $6.975 billion to refinance some of its existing commercial paper, which has an average interest rate of 2.37%. ExxonMobil will also use some of these funds for other general corporate purposes, including working capital, acquisitions, capital expenditures, and other various business opportunities. It's not a bad position to be in and many companies would love to borrow $1.5 billion at 3.095%, repayable in 30 years. But investors shouldn't be as excited about owning ExxonMobil's 2049 notes, however, which yield slightly more than 3% for three decades. It's an excellent deal for ExxonMobil, though.