ExxonMobil will soon be "cookin' with natural gas" after this week's takeover of XTO Energy.
For a mere $3o billion in ExxonMobil stock and assumption of $10 billion in XTO Energy debt, Exxon is now (pending approval of shareholders and regulatory clearance) the leader in developing cleaner fuel technologies in the United States via natural gas. The pay off will likely be realized in a short term and long term scenario parallel to likely changes in fuel stock dynamics.
The immediate benefit to Exxon is access to recent natural gas hydraulic fracturing drilling technology. XTO Energy has had a steady growth rate of 25% per year for the past several years due to its more efficient drilling and storage techniques that has enabled drilling in shale formations that were previously cost prohibitive. Also, Exxon natural gas inventory stocks receive a nice domestic boost. And, it is only paying $2.96 per thousand cubic feet for XTO's proven reserves of 45 trillion cubic feet of gas.
Longer term, the acquisition of XTO is a major domestic piece of the worldwide nat gas purchases Exxon has been accumulating as it positions itself for an anticipated shift in natural gas as a bridge fuel to eventual non-carbon based fuels.
Not too long ago natural gas was burned off at oil field production operations as a waste product due to its past low market price. The future value of natty gas will be much different, especially if current legislation passes requiring nat gas for government fleet vehicles. Exxon is now well positioned to someday even fuel potential future compressed natural gas vehicles.
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