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ExxonMobil buys XTO Energy for $31 billion XTO has two platforms in Cook Inlet, which will make Exxon an operator of a producing field in Alaska; main focus of purchase XTO’s natural gas assets Mark Williams Associated Press Energy Writer
ExxonMobil will buy XTO Energy Inc. in an all-stock deal worth $31 billion as the oil giant moved aggressively Dec. 14 to capitalize on the growing supply of natural gas at home. The deal could signal a new rush to own natural gas assets by major integrated producers, and perhaps the start of a significant consolidation in the energy industry.
“Exxon is the group leader and it sets the trend. I would expect more acquisitions in the next three to six months,” said Fadel Gheit, senior energy analyst for Oppenheimer. “Who that will be is the $64,000 question.”
XTO’s holdings include two oil and gas platforms in Cook Inlet’s Middle Ground Shoal field. The company acquired the Alaska interest in 1998 from Shell. That field started production in the mid-1960s and peaked a few years later. It is a minor oil and gas producer now — producing about 80,000 barrels of oil and 17 million cubic feet of gas per month, according to state statistics. XTO once held a small interest in the North Slope’s Kuparuk River field, but it sold that interest in 2005.
Although Exxon has extensive production from North Slope oil fields, it doesn’t operate any of the fields, and Middle Ground Shoal would be the first field the oil giant would run in the state. Exxon is developing the Point Thomson field on the North Slope, but that field isn’t expected to start production until 2014.
Exxon is closely watched in the industry and an acquisition like XTO could prompt other companies like Royal Dutch Shell, BP or Chevron Corp. to move.
Potential targets include big natural gas companies like Chesapeake Energy, Devon Energy and Anadarko, Gheit said.
XTO shows the priority that major producers are giving to natural gas as a fuel source. New technology has unlocked trillions of cubic feet of natural gas at home, meaning energy producers do not have to navigate tricky political environments overseas.
That doesn’t mean that those projects are being excluded.
Exxon just last week gave the go-ahead for a $15 billion natural gas project in Papua New Guinea, positioning the world’s largest publicly traded oil company to provide energy to a fuel-hungry China.
XTO claims about 45 trillion cubic feet of gas, much of it trapped in tight formations known as shale. Shares in the company jumped 15 percent, or $6.37, to $47.86 on the New York Stock Exchange Dec. 14.
Shares of Exxon fell 4.3 percent, or $3.14, to $69.69.
New organization Exxon has signaled recently that it was moving increasingly toward landing natural gas assets. Once the deal closes, Exxon said it will establish a new organization to manage global development and production of unconventional resources.
The company, based in Irving, Texas, will issue 0.7098 common shares for each common share of XTO, representing a 25 percent premium to XTO stockholders. Exxon also will assume $10 billion in XTO debt.
The deal values XTO’s shares at $51.69, based on the closing price Dec. 11.
“XTO has a proven ability to profitably and consistently grow production and reserves in unconventional resources,” Bob Simpson, chairman and founder of XTO, said in a statement.
Simpson is one of the highest paid executives in the United States. His compensation last year was valued at $53.5 million.
He retired as CEO in 2008.
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