Exxon Mobil Corp.’s agreement to buy XTO Energy Inc. in an all-stock deal valued at $41-billion (U.S.) is a bet that natural gas usage in the long-run will rise as a cleaner energy alternative to coal and heavy oil. Exxon is the largest publicly traded oil company and has been accumulating shale gas assets in Poland, Germany, Hungary, and Argentina.
The acquisition is a key strategic move to position Exxon within the shale gas market and analysts like the deal. Major energy producers have been flocking to shale gas as a key energy source over the long term and new exploration has been extended outside North America’s prolific shale gas plays like the Horn River basin, and Barnett basin. Many companies are financing by selling off conventional natural gas production in favor of lower-cost shale gas.
Commenting on the Exxon, XTO deal, MarketWatch stated;
The move marks a major bet on gas as a cleaner-burning fuel than oil, as governments around the world look to Copenhagen climate-change talks this week to stem the flow of greenhouse gases into the atmosphere to combat global warming.
According to David Rockecharlie, co-head of energy investment banking group at Jefferies & Co. which co-advised XTO on the transaction:
“Every major oil company is thinking about getting into these shale plays both in the U.S. and globally, the question is how”.
Martin Molyneaux, managing director of institutional research at Calgary’s FirstEnergy Capital Corp. was quoted:
“It’s kind of like the Pope blessing the exercise. You couldn’t have a more credible enterprise sanctifying the unconventional industry in North America. This will cause a rethink for everybody. It pretty much revalues the whole industry up and down the value chain both in Canada and the United States.”
Market Watch: Exxon Mobile buys XTO Energy in $41 billion deal
Globe & Mail: Exxon deal shakes up natural gas sector
