Exxon Bets on Domestic NG Market
with XTO Purchase

December 15th, 2009 • Filed Under
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Reported by Ann Rascalli

IRVING, Texas - Exxon Mobil announced today it will buy XTO Energy in an all-stock deal worth $31 billion as the oil giant seeks to capitalize on the growing supply of natural gas at home.

Does the deal signal a major consolidation in the natural gas sector of the energy industry? Too early to say, but it does seem to indicate there will be a new rush to own NG assets by major integrated energy producers.

One Oppenheimer analyst was quoted by the AP as saying “Exxon is the group leader and it sets the trend. I would expect more acquisitions in the next three to six months.” Exxon is closely watched in the industry and an acquisition like XTO could prompt other companies like Royal Dutch Shell PLC, BP BLC or Chevron Corp. to move.

Major producers see natural gas as a priority fuel source, especially in a reduced carbon economy. Trillions of cubic feet of domestic natural gas has become available using new drilling technology.

XTO claims about 45 trillion cubic feet of gas, much of it trapped in tight formations known as shale.

Exxon has signaled recently that it was seeking more natural gas assets. Once the  XTO deal closes, Exxon will reportedly establish a new organization to manage global development and production of unconventional resources.

 

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