Big Oil Has $12 Billion Bond Splurge as Oil Slump Saps Cash

(Bloomberg) --

Royal Dutch Shell Plc, Total SA and Equinor ASA are selling $12 billion of bonds as the combined effect of the slump in oil prices and the collapse in demand threaten to sap cash flows for months.

Big Oil, already under pressure from shareholders before the coronavirus crisis to improve returns, has moved swiftly to defer projects, cut spending and halt share buybacks. They are seeking to protect dividends as the economic slump and a price war led by Saudi Arabia undermines profits.

Anglo-Dutch oil giant Shell is selling $3.75 billion of bonds while its French peer Total is tapping the market with 3 billion euros ($3.3 billion) of debt. Equinor sold $5 billion of notes maturing between 2025 and 2050, the Norwegian company said Wednesday in a statement.

“In combination with our $3 billion action plan to reduce cost, this transaction will further strengthen our financial resilience and flexibility going forward, and ensure liquidity to prioritized projects,” Equinor Chief Financial Officer Lars Christian Bacher said in the statement.

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Shell already signed a $12 billion credit line at the end of March, one of its biggest single facilities, giving it more room to weather the crisis room after its credit outlook was downgraded.

The healthiest crude producers have signaled they’ll use their strong balance sheets to take on more debt during the crisis as cost cuts won’t suffice to plug the cash shortfall. That’s prompting some analysts and investors to question if they can continue to maintain their payouts if the crisis persists.

©2020 Bloomberg L.P.