Exxon's $31B Purchase of XTO Could Signal Start of Consolidation in NatGas Industry
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Price: $165.11 -0.63%
Rating Summary:
16 Buy, 23 Hold, 1 Sell
Rating Trend:
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Today's Overall Ratings:
Up: 8 | Down: 6 | New: 26
Rating Summary:
16 Buy, 23 Hold, 1 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 8 | Down: 6 | New: 26
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This morning, Exxon Mobil Corp. (NYSE: XOM) agreed to buy XTO Energy Inc. (NYSE: XTO) in an all-stock transaction valued at $41 billion, of which $10 billion comes from existing debt. Shares of XTO have soared on the news, currently up 15% to $47.77, while shares of Exxon are down 4.5% to $69.55.
Today's market reaction seems to underscore the need by big oil to own natural gas assets. Some traders are suggesting that the move by the world's largest oil company could spark some serious consolidation within the natural gas industry.
“If there was ever a time to buy U.S. natural gas, it would be now, while fundamentals are weak and reflected as such in share prices,” stated analysts from Wells Fargo.
Potential targets for acquisition by Exxon Mobil’s competitors could be Chesapeake Energy (NYSE: CHK), Devon Energy (NYSE: DVN) and Anadarko (NYSE: APC).
XTO being acquired shows the bias that major oil companies are giving to natural gas producers as new technologies have found trillions of cubic feet of natural gas under U.S. soil. This will keep energy companies from having to deal with the difficult geopolitical issues overseas.
“XTO has a proven ability to profitably and consistently grow production and reserves in unconventional resources,” stated chairman and founder of XTO, Bob Simpson.
XTO will receive 0.7098 common shares of Exxon Mobil for every share bought, giving a 25 percent premium to XTO shareholders.
“Despite the fact that XOM is in a strong financial position, and is a company that seeks to create value over the long term, we believe the shorter-term outlook may govern the stock's performance on the heels of the announcement,” analysts from Collins Stewart LLC said. The firm currently has a Hold rating on shares of XOM.
Today's market reaction seems to underscore the need by big oil to own natural gas assets. Some traders are suggesting that the move by the world's largest oil company could spark some serious consolidation within the natural gas industry.
“If there was ever a time to buy U.S. natural gas, it would be now, while fundamentals are weak and reflected as such in share prices,” stated analysts from Wells Fargo.
Potential targets for acquisition by Exxon Mobil’s competitors could be Chesapeake Energy (NYSE: CHK), Devon Energy (NYSE: DVN) and Anadarko (NYSE: APC).
XTO being acquired shows the bias that major oil companies are giving to natural gas producers as new technologies have found trillions of cubic feet of natural gas under U.S. soil. This will keep energy companies from having to deal with the difficult geopolitical issues overseas.
“XTO has a proven ability to profitably and consistently grow production and reserves in unconventional resources,” stated chairman and founder of XTO, Bob Simpson.
XTO will receive 0.7098 common shares of Exxon Mobil for every share bought, giving a 25 percent premium to XTO shareholders.
“Despite the fact that XOM is in a strong financial position, and is a company that seeks to create value over the long term, we believe the shorter-term outlook may govern the stock's performance on the heels of the announcement,” analysts from Collins Stewart LLC said. The firm currently has a Hold rating on shares of XOM.
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