Exxon’s move ‘good signal’ for gas firms
In a move seen as a vote of confidence in the future of America’s natural gas industry, ExxonMobil said Monday it plans to acquire XTO Energy Inc. in a $41 billion deal.
Both companies have operations in western Colorado’s Piceance Basin. XTO also has been “a major player” in the San Juan Basin in southwestern Colorado and northern New Mexico, said Carter Mathies, president of Clover Energy Services LLC in Grand Junction.
The all-stock transaction includes the assumption of $10 billion of XTO existing debt.
ExxonMobil said the deal will enhance its position in the development of unconventional natural gas and oil resources. The Piceance Basin holds one such resource — gas locked in sandstone formations.
XTO, based in Fort Worth, Texas, holds a resource base equivalent to 45 trillion cubic feet of gas. ExxonMobil will be acquiring assets concentrated in more than a dozen states.
“Overall I can’t take it as anything but a good signal for the longer-term prospects of natural gas here in the U.S.,” Mathies said.
That includes prospects for the Piceance Basin, he said. The gas-rich basin is benefiting from new pipeline export capacity that has helped put it in its best competitive position in years, Mathies said.
Analysts speculated Monday that Exxon’s move could indicate the start of a rush of buying of natural gas assets by major energy companies hoping to take advantage of expanding domestic reserves.
“Exxon is the group leader and it sets the trend,” said Fadel Gheit, senior energy analyst for Oppenheimer.
Said Mathies, “It could very well be that we’re in for a round of consolidation and merger and acquisition activity.”
He said he thinks large companies recognize there are still many opportunities to help develop good, long-term supplies of a clean-burning, secure fuel source.
At the same time, Mathies said it’s important not to read too much into the ExxonMobil/XTO deal in terms of what purchases other companies might make. It was ExxonMobil’s size that enabled it to make a cash acquisition of such magnitude, he said.
ExxonMobil has been active in natural gas development in Rio Blanco County, where it has an interest in about 300,000 acres. It has farmed out operations of some of that acreage to other companies, including XTO.
In 2005, the two companies agreed to have XTO develop ExxonMobil lease holdings in the northeastern portion of the Piceance Basin in Rio Blanco and Garfield counties.
The arrangement allowed XTO to earn a 50 percent working interest ownership in about 69,500 acres by drilling four wells.
The acquisition announced Monday is subject to XTO stockholder approval and regulatory clearance. XTO stockholders would receive ExxonMobil stock at a rate representing a 25 percent premium to XTO, ExxonMobil said.