Exxon Mobil Corporation (NYSE: XOM) rarely gets analyst upgrades and downgrades outside of a major move in the underlying oil trends but that is not the case today. Argus has downgraded Exxon from BUY to HOLD.
The note says, “While Exxon is allocating more capital to liquids-rich plays, its production mix is getting gassier. Moreover, the measured pace at which Exxon is making this transition is hampering near-term results. While the strategy may make sense in the long term, we view it as a negative in the current low gas price environment. We also do not see a near-term catalyst pushing natural gas prices meaningfully higher.”
The key takeaway is that its production mix is getting gassier at a time when nat-gas just doesn’t add up to profits. Production was also weaker than anticipated. Argus is lowering its 2012 EPS estimate from $8.20 to $8.10 and setting an initial 2013 forecast of $8.50 to reflect the impact of downward revisions to the natural gas price view.
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