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Oil majors rush to raise billions in debt as crude prices sink

Thu, 02nd Apr 2020 16:24

* Shell, BP, Total raise over $10 billion this week

* Exxon last month raised $8.5 billion

* GRAPHIC: Oil majors slash 2020 spending: https://reut.rs/39u1Dh3

* GRAPHIC-Big Oil's rising debt: https://tmsnrt.rs/2U73Jit

By Ron Bousso

LONDON, April 2 (Reuters) - The world's top oil and gas
companies are rushing to raise tens of billion of dollars in
debt to help them weather one of the worst downturns in the
sector's history while faced with high fixed costs and looming
dividend payments.

Royal Dutch Shell, BP, France's Total
, Norway's Equinor and Austria's OMV
have all tapped bond markets this week, raising more
than $10 billion according to Reuters calculations.

Oil prices sank 65% in the first three months of the
year to lows of $22 a barrel as strict movement restrictions
imposed around the world to limit the spread of the coronavirus
led to a collapse in demand for transportation fuels, while a
fight for market share between top producers Saudi Arabia and
Russia accelerated price falls.

The top five so-called oil majors saw their combined debt
rise to $230 billion last year as they borrowed to maintain
capital spending while giving back billions to
shareholders.

This week's forays into the bond markets come after Exxon
Mobil raised $8.5 billion last month, while Shell also
announced a $12 billion revolving credit facility this
week.

"All the majors are shoring up liquidity to cover mid-term
requirements. No one wants to be at the back of the queue," said
a banker involved in debt raising. "The companies want to
demonstrate they are able to ride out the storm," he added.

The European bond issues were all reported to be
over-subscribed despite credit agencies downgrading the ratings
or ratings outlooks of the oil majors in recent days.

A Shell spokeswoman said the debt raising was "part of
actively managing our liquidity, in addition to our additional
credit facility".

OMV confirmed the tranches. BP and Total did not respond to
requests for comment. Equinor said on Wednesday the bond would
"strengthen our financial resilience and flexibility".

The oil majors are expected to report sharp drops in revenue
in the first quarter with analysts saying some would need to
borrow money to cover spending and dividend payouts.

Although the recent collapse in prices is now forcing them
to sharply scale back discretionary spending, none have so far
indicated an intention to reduce dividends, although investors
and analysts said they might be forced to in case of a
protracted downturn.

FACTBOX-Global oil, gas producers cut spending after crude
price crash

Following are the fund raisings by oil majors in recent
days:

* Shell tapped the market on Wednesday to raise $3.75
billion in
bonds with 5, 10 and 20 year maturities, with coupons of 2.375%,
2.75% and 3.25% respectively, according to its pricing term
sheet.

* On Thursday, the Anglo-Dutch company raised an additional
3
billion euros in 4, 8 and 12 year bonds.

* BP was also set to raise 3.25 billion euros through the
sale of
bonds with maturities of 4, 8 and 12 years on
Thursday.

* Total on Wednesday raised 3 billion euros.

* Norwegian oil firm Equinor on Wednesday raised debt of $5
billion.

* Austria's OMV booked 1.75 billion euros on
Thursday.

* Exxon on March 20 raised $8.5 billion although it had to
pay a
large premium to get the paper away.

(Reporting by Ron Bousso, additional reporting by Kirsti Knolle
in Vienna, Felix Bate in Paris; Editing by Kirsten Donovan)

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