With a bullish view on natural gas prospects, the world’s largest publicly traded oil company ExxonMobil Corporation (XOM) will buy XTO Energy (XTO) in an all-stock deal worth $31 billion, excluding debt.
The transaction is valued at $41 billion, including about $10 billion in XTO debt, and is based on the Dec 11 closing share prices in both the companies. Completion of the transaction is expected in the second quarter of 2010.
Under the terms of the agreement, Exxon has agreed to issue 0.7098 common shares for each common share of XTO, representing a 25% premium to XTO shareholders. The agreement is approved by the boards of directors of both the companies.
The agreement will enhance Exxon’s position in the development of unconventional natural gas and oil resources and is subject to XTO stockholder approval and regulatory clearance.
XTO’s outstanding unconventional natural gas resource base, along with Exxon’s advanced R&D and operational capabilities, global scale and financial capacity should enable development of additional supplies of unconventional oil and gas resources. This will benefit domestic as well as international consumers.
Following this deal, Exxon will gain a major grip over North America’s newest energy discoveries as it looks forward to the growth of natural gas in expanding its share of the world’s largest energy market. After closing of the deal, Exxon said it will establish a new organization to manage global development and production of unconventional resources.
We believe Exxon’s decision to purchase XTO will definitely prompt its peers such as Chevron Corporation (CVX), BP Plc (BP) and Royal Dutch Shell (RDS.A) to move forward with similar deals.
Read the full analyst report on “XOM”
Read the full analyst report on “XTO”
Read the full analyst report on “CVX”
Read the full analyst report on “BP”
Read the full analyst report on “RDS.A”
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