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

|About: Exxon Mobil Corporation (XOM)|By:, SA News Editor

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.