Exxon: What, me worry?

• While the four oil majors reporting this week - Exxon (XOM +0.4%), BP, Total, and Chevron - were bailed out by their downstream businesses (only Chevron missed estimates), they're still borrowing heavily to fund capex and the dividends upon which they've staked their reputations, writes Liam Denning.
• Combined free cash flow for the trailing four quarters stands at negative $39B.
• While Exxon isn't the worst of the bunch, S&P did take away its AAA rating earlier this week. In true Exxon fashion, the company responded with a dividend hike, this morning's earnings release made no mention of the rating change, and the earnings call had plenty of reminders of the company's long history of dealing with good and bad times.
• But CEO Rex Tillerson is set to retire within a year, and it looks like he'll turn over a weaker company than the one he inherited from Lee Raymond. Along with the rating cut, the company didn't replace reserves last year for the first time in more than 20 years, paid $35B for XTO Energy at the peak in natural gas prices, inked an ill-timed partnership with Rosneft, and hasn't really grown oil and gas production.
• As part of its ratings cut, S&P cited worry about Exxon's ability to replace reserves as debt climbs. Without production growth, notes Denning, how do you square rising leverage with a commitment to raising dividends, not to mention restarting buybacks (barring, of course, a big rebound in oil prices)?