Exxon Mobil buys XTO Energy for $41bn

Exxon Buys XTO

Yesterday was 'Mega Merger Deal Monday' for Exxon Mobil as they announced they would be snapping up Texas-based natural gas producer XTO Energy for a reported $41 billion.

The move comes as Exxon look to boost its US natural gas reserves in the ever more testing global energy market, analysts are calling the acquisition a bet on future demand for natural gas as the nation looks for energy sources with lower greenhouse-gas emission levels than coal and oil.

The deal also indicates a growing confidence among utilities that recent advances in exploiting natural gas from widespread deposits of shale rock have unlocked vast supplies of gas for wider use at reasonable prices.

Good for security and economy

Under the terms of the deal, Exxon will pay XTO shareholders 0.7098 common shares for each of their XTO shares, or about $51.69 based on Friday's closing prices. The deal, which is taking advantage of low natural gas prices, represents a 25 percent premium for XTO's shares, as reported by the New York Times.

The deal is also expected the generate a number of jobs, making it good news for America's economy as well as its energy security.

As WashingtonPost.com reports, the deal reflects the "long-term energy view, which would be that natural gas would be the fastest-growing fuel over the next 30 to 40 years," said Deutsche Bank oil analyst Paul Sankey. "We're moving from a 20th century driven by gasoline to a 21st century driven by electricity, and the way you're going to generate it is through natural gas as much as anything."

45 trillion cubic feet of gas

The deal will 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.

XTO's chairman, Bob Simpson, responded by saying, "as the world's leading energy company, Exxon Mobil will... open new opportunities for the development of natural gas and oil resources on a global basis."

There is speculation within the industry that the deal could spark a mass sell off of other natural gas producers with firms such as Devon Energy now considered potential takeover targets.

The deal is expected to be completed by late 2010.

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