Too much pessimism about Exxon's production profile, Argus says

Exxon Mobil (XOM +0.5%) shares have dropped ~11% YTD amid disappointing earnings and declining production, but Argus analyst Michael Burke believes the market is overreacting to the bad news.

Argus thinks investors have become too pessimistic about XOM's production profile (47% gas in Q4), and the negative sentiment is reflected in the stock's current valuation; XOM will remain the global energy leader and a superior allocator of capital, as demonstrated by its leading returns on invested capital, the firm says.

However, Oppenheimer’s Fadel Gheit warns that XOM’s problems could be just getting started, warning that lower oil prices could dim the earnings outlook; at $90 oil and $5 natural gas, XOM could not internally fund its share buyback, and at $80 oil it has to borrow to fund capex and dividends.

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Comments (3)
  • evan.prospect
    , contributor
    Comments (704) | Send Message
    If oil dropped to $80 a barrel, wouldn't interest rates drop as well making borrowing to spend on cap ex and dividends less expensive? Obviously $80 a barrel is not good for those of us who are long XOM but it may not be as bad as the Oppenheimer analyst makes it out to be.


    On another note, I hope XOM is aggressive in working with the "new" Pemex.
    7 Feb 2014, 05:20 PM Reply Like
  • User 9636051
    , contributor
    Comment (1) | Send Message
    The logic of $90 oil does not make much sense. If Exxon is having difficulty finding and replacing oil with it's advance technology then what will happen when other producers can't fill there gap with the use of less advanced techniques. Will the price rise to $120? Then what happens to the valuation? REMEMBER:: Oil and Gas are a diminishing resource!
    7 Feb 2014, 05:31 PM Reply Like
  • Michael Fitzsimmons
    , contributor
    Comments (11653) | Send Message
    As a long-term Exxon Mobil shareholder there is one move I would love to see: Rex Tillerson replaced with COP Chairman & CEO Ryan Lance.


    Can you imagine the shareholder value and returns Lance could unleash with all the assets that Exxon holds? I know one move Lance would make right off the bat: fix XOM's dividend, the lowest in the entire peer group.
    8 Feb 2014, 05:07 PM Reply Like
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