XTO Keeps Expanding with Acquisitions and Increased Production

XTO Energy (XTO) is one of the more acquisitive companies in the natural gas space; they have announced another meaningful one  - while increasing future production targets (a very good thing) So we not only get higher prices in natural gas, but we have the type of companies that can expand output; exactly what we want to see. (Note: I still think commodities are overdue for a pullback, but this is positive long term news)

• XTO Energy Inc. (XTO) announced today that the Company is increasing its 2008 production growth target to 28 - 30% based on recently announced agreements to acquire Hunt Petroleum Corporation and Bakken Shale producing properties from Headington Oil Company
• Based on volume projections for next year, the Company is also establishing an annual production growth target of 20% for 2009.
• In order to achieve this production growth, a preliminary 2009 development budget of $4.0 - $4.5 billion utilizing 110 to 120 operated drilling rigs is anticipated.
• "Given XTO's significant acquisitions and expanding shale basin presence, we have now assimilated the best property base for growth in the Company's history," stated Bob R. Simpson, Chairman and Chief Executive Officer.
• "With acquisitions and our planned development work, we are targeting a production volume increase in 2009 of about 450 million cubic feet equivalent above the average rate in 2008. This significant growth can be delivered with about 50% to 55% of the estimated cash flow at the current commodity price outlook."

Acquisition of Hunt Petroleum

• XTO Energy says it is acquiring privately held Hunt Petroleum Corp. for $4.19 billion in cash and stock.
• XTO Energy Inc. says the deal includes $2.6 billion in cash and 23.5 million shares of XTO stock. The stock portion of the deal is valued at about $1.6 billion, or $67.50 per share.
• Fort Worth, Texas-based XTO estimates Hunt's properties' proved reserves total about 1.052 trillion cubic feet of natural gas equivalent. About 70 percent of the properties are in East Texas, Central and Northern Louisiana.

XTO Energy Inc. is a domestic natural gas producer engaged in the acquisition, exploitation and development of quality, long-lived oil and natural gas properties in the United States. Its properties are concentrated in Texas, New Mexico, Arkansas, Oklahoma, Kansas, Wyoming, Colorado, Alaska, Utah, Louisiana, Mississippi and Montana.

Disclosure: Long XTO Energy in fund; no personal position

Comments

[Scammr]

Makes ConocoPhillips' $36B price for 12TCF of reserves from Burlington now look like a bargain!

2008 Jun 11 10:04 AM

[Prof. Walsh]

Mark please see my 5/30 comments to your article at that time; adding to my long position at the 75 day EMA (i.e. $ 62ish May 27th) was a no brainer. Keep it simple folks; Bobby S. is a winner he will be doing a deal on his death-bed boots and all. I will take 2/3X the growth rate at a multiple near the S/P mean anyday of the week!

Agree the pullback is coming-TSO in my crosshairs (hhmm Russ Winter writing covered calls ?)

2008 Jun 11 11:48 AM

[TraderMark]

Yes I remember your reply, maybe the market was anticipating some acquisition news which generally drives such stocks down. Looks like he wants to do yet another one in the $1-1.5 B range later in the year as well. Looks like there is a family feud going on in Hunt so we'll see if this one closes by September or not - one of the sons of the family says he will sue - interesting drama.

XTO starting to remind me of CHK.

Scammr, you are right about that - I remember the refrain was "they overpaid" but at this point any assets acquired in 2004-2006 will look like bargains I suppose - in any piece of the energy pie.

2008 Jun 11 12:47 PM

[Mmarrkk]

Scammer/Mark: totally agree. You still hear people giving Jim Mulva a hard time about how he overpaid for BR and this and that. Of course that usually comes from people who only know how to look at the spot market price for gas and not the forward curve or fundamentals of the markets for gas. That would be most Wall Street Analysts I believe!! They still chew on him about BR. Looking sweet at $95/shr.

XTO is a winner. I'll take a nice basket of CHK, XTO, EOG and DVN please! And throw in some COP and XOM for my low risk dividend/income portion!! I'd really like to get my hands on some of the senior notes from CHK for income!!! but I'm just a little guy!

2008 Jun 12 11:06 AM

[Loup-Garou]

Increased production targets are bullish. The new drilling is very bullish. Short term the play is oil. Long term, NatGas is as good as oil, or better. Own a small position in wife's IRA.

2008 Jun 12 01:46 PM

[sunrises]

Hi Mark:

So, they anticipate utilizing drilling RIG ehh. Sounds interesting.

Take a look at NOV as well. Value is real nice and there is an apparent demand for them. A possible good buy.

2008 Jun 13 12:54 AM