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Wed, Dec 16, 2009 - Page 10 News List

ExxonMobil bets on gas with XTO deal for US$41 billion


ExxonMobil announced plans on Monday to acquire rival exploration firm XTO Energy for US$41 billion, a deal giving the largest US energy producer a bigger share of domestic natural gas reserves.

The biggest US oil group said the all-stock takeover deal would “enhance ExxonMobil’s position in the development of unconventional natural gas and oil resources.”

The transaction includes the assumption of US$10 billion in XTO debt and offers shareholders a 25 percent premium to the most recent stock price.

Analysts said the deal acquiring XTO, an independent drilling firm that has become one of the largest producers of natural gas, highlights the growing importance of the cleaner-burning fuel amid concerns on greenhouse gases.

The deal “will be a taken as a major bullish signal on natural gas,” said Joe Weisenthal, analyst at the financial Web site Business Insider.

“The deal will boost Exxon’s presence in the natural gas industry at a time of low prices for the commodity,” Melly Alazraki wrote on the Daily Finance Web site.

While natural gas is a byproduct of oil wells, XTO and others have been working to recover gas trapped in wells thought to be depleted through vertical wells to pockets of trapped methane.

Rex Tillerson, ExxonMobil chairman and chief executive, said XTO’s expertise “should enable development of additional supplies of unconventional oil and gas resources, benefiting consumers both here in the US and around the world.”

The deal, one of the biggest this year, has been approved by the boards of both firms and requires XTO stockholder approval and regulatory clearance.

XTO has rights to some 45 trillion cubic feet of natural gas including shale gas, tight gas, coal bed methane and shale oil.

These will complement ExxonMobil’s holdings in the US, Canada, Germany, Poland, Hungary and Argentina, the companies said.

Company officials hope to close the deal in the second quarter of next year and then establish a new upstream organization to manage production of unconventional resources and use of new oil exploration technology.

Bob Simpson, chairman and founder of XTO, said the firm has established a resource base of energy across the US over the company’s 23 years.

“XTO has a proven ability to profitably and consistently grow production and reserves in unconventional resources,” he said.

“As the world’s leading energy company, ExxonMobil will build on our success and open new opportunities for the development of natural gas and oil resources on a global basis,” Simpson said.

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