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Exxon Mobil Acquiring XTO Energy in $41B Deal; Enhances US Position in Unconventional Natural Gas and Oil

Exxon Mobil Corporation is acquiring XTO Energy Inc. in an all-stock transaction valued at $41 billion. The agreement, which is subject to XTO stockholder approval and regulatory clearance, will enhance ExxonMobil’s position in the development of unconventional natural gas and oil resources.

XTO is a US producer engaged in the acquisition, exploitation and development of quality, long-lived oil and natural gas properties in the United States. Its properties are concentrated in Texas, New Mexico, North Dakota, Pennsylvania, West Virginia, Arkansas, Oklahoma, Kansas, Wyoming, Colorado, Utah, Louisiana and Montana.

XTO’s resource base is the equivalent of 45 trillion cubic feet of gas and includes shale gas, tight gas, coal bed methane and shale oil. These will complement ExxonMobil’s holdings in the United States, Canada, Germany, Poland, Hungary and Argentina.

Under the terms of the agreement, approved by the boards of directors of both companies, ExxonMobil has agreed to issue 0.7098 common shares for each common share of XTO. This represents a 25% premium to XTO stockholders. The transaction value includes $10 billion of existing XTO debt and is based on the closing share prices of ExxonMobil and XTO on 11 December 2009.

Following the transaction closing, ExxonMobil intends to establish a new upstream organization to manage global development and production of unconventional resources, enabling the rapid development and deployment of technologies and operating practices to increase production and maximize resource value. The new organization will be located in Fort Worth, Texas, in XTO’s current offices.

Completion of the transaction is expected in the second quarter of 2010. In connection with the transaction, J.P. Morgan Securities Inc. are acting as financial advisors to ExxonMobil and Barclays Capital Inc. and Jefferies & Company Inc. are acting as financial advisors to XTO.

Comments

ejj

This is great news for American energy independence & the economy. The nat gas industry needs to work on its fracturing practices or else enviros & trial lawyers are really going to come out of the woodwork a heck of a lot more than they have though. However, the vast, vast majority of natural gas wells have been drilled safely with hydraulic fracturing.

SJC

Oil companies paid little attention to natural gas companies until recently. This could be the beginning of a big move where Chevron and others acquire companies with natural gas resources. This would be good, if it led to more natural gas cars and filling stations, but I do not think that is their motive at this time.

ejj

My theory is it's all about Asia...there is a glut of NG on the market in the US right now - not enough buyers - but if you are able to get it to Asia, you open up massive demand and the beaten down price of NG goes back up, making everyone involved in NG rich. Exxon recently inked a major deal in Asia with Sinopec http://www.wtop.com/?nid=111&sid=1830222

SJC

NG has been around fifty cents per therm at the wholesale level for a while. Exxon has taken in billions of dollars in the run up of oil prices, they are buying when the companies do not have a lot of leverage. This is a can't lose for Exxon, even the conservative scenarios have them making even more money.

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