Natural Gas Acquisition XTO Energy by Exxon
Exxon Mobil said Monday that it has agreed to buy XTO Energy, a natural gas producer, for $31 billion in stock and the assumption of $10 billion in debt, the largest energy merger in years. The agreement, which is subject to XTO stockholder approval and regulatory clearance, will enhance Exxon Mobil’s position in the development of unconventional natural gas and oil resources.
“We are pleased that ExxonMobil and XTO have reached this agreement,” said Rex W. Tillerson, chairman and chief executive officer of Exxon Mobil Corporation.
Under the terms of the deal, Exxon will pay XTO shareholders .7098 common shares for each of their XTO shares, or about $51.69 based on Friday’s closing prices. This represents a 25 percent premium to XTO stockholders. The deal, which is taking advantage of low natural gas prices, represents a 25 percent premium for XTO’s shares.
The deal would give Exxon the equivalent of about 45 trillion cubic feet of natural gas throughout the United States, in a bet that demand will continue to rise. XTO, founded in 1986, is the nation’s largest domestic producer of natural gas.
“XTO is a leading U.S. unconventional natural gas producer, with an outstanding resource base, strong technical expertise and highly skilled employees,” Rex Tillerson, Exxon’s chief executive, said in a statement.
Exxon’s deal has prompted speculation among analysts over which natural gas producers may be up for sale next, with companies like Devon Energy now considered potential takeover targets.
Tillerson said the agreement is good news for the United States economy and energy security, as it will enhance opportunities for job creation and investment in the production of America’s own clean-burning natural gas resources. [ I don’t see how this could be true. Normally during these mergers entire departments are laid off to boost profits and shareholder happiness. So, this statement is completely misleading. ]
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.
Exxon said that after the deal’s close, expected in the second quarter next year, it would keep XTO as an upstream business unit to develop natural gas resources from unconventional sources like shale rock. The business will remain in XTO’s headquarters in Fort Worth, Tex.