Exxon Mobil Acquires XTO Energy for $31 Billion

Mayank Mehta
14 Dec, 2009
New York City

Exxon Mobil Corp agrees to acquire XTO Energy Inc for $31 billion. The low price of natural gas and impending rise in the demand of clean energy sources played a role in the largest acquisition since the purchase of Mobil in 1998.

[R]11:00 AM New York – Exxon Mobil Corp agrees to acquire XTO Energy Inc for $31 billion. The low price of natural gas and impending rise in the demand of clean energy sources played a role in the largest acquisition since the purchase of Mobil in 1998.[/R]

Exxon Mobil Corp agreed to acquire the largest U.S. natural gas producer XTO Energy Inc for $31 billion. Exxon will offer 0.7098 of its share in exchange of one XTO share and the deal is expected to close in the second quarter of 2010.

Exxon Mobil ((XOM)) decreased 3.9% or $2.80 to $70.03 and XTO Energy surged 15.69% or $6.51 to $48.

Exxon has $31 billion in cash on its balance sheet and will assume $10 billion in debt to pay for the acquisition. Over the last seven years the energy giant has set on the sidelines and accumulated cash and bought back stocks of $200 billion.

XTO acquisition follows the shift in the energy consumption pattern worldwide as the U.S. and other developed nations shift to cleaner energy sources away from coal. The global energy consumption is expected to increase by 30% in the next 20 years as China, India and other Asian nations industrialize.

Exxon Mobil agreed to acquire 23.5% stake for $4 billion in Jubilee Oilfield from Kosmos Energy, LLC on October 5, 2009.

Exxon acquired Mobil Corp for $77 billion in December 1998 and British Petroleum purchased Amoco Corp for $53 billion.

XTO Energy has been active in extracting natural gas from shale formations in the region spread between Pennsylvania, New York and West Virginia and in Texas and North Dakota.

XTO has been on an acquisition spree of its own as the natural gas prices plunged multi-year low in September of last year. The company has proven reserves of 13.9 trillion cubic feet of gas and total reserves of 45 trillion cubic feet.

Revenues at XTO Energy have more than doubled since 2005 to $7.7 billion in 2008 and in the period net income increase from $1.1 billion to $1.9 billion.

The company in a presentation at Wells Fargo conference said that compound growth in proven reserves has been 29% and reserves has increased 4 billion cubic feet of equivalent energy to 13.9 billion cubic feet. Daily production in cubic feet has increased to 2.8 million in 2009 from 1.01 million in 2004.