XTO Energy: Beating a Tax Deadline

Buy-recommended XTO Energy (XTO) offers unlevered appreciation potential of 22% to estimated net present value of $88 a share. Happy to accommodate sellers who may want to act before the capital gains tax rate may be increased in 2009, Chairman Bob Simpson announced a $4.2 billion acquisition on June 10, following soon after the May 28 announcement of a $1.8 billion acquisition. Both deals appear to have growth potential and contribute to updated projections of cash flow (Ebitda).

Projected cash flow capitalized at unlevered multiples (PV/Ebitda) related to reserve life (Adjusted R/P) supports NPV. Oil price remains in a long-term uptrend while natural gas is underpriced relative to oil.

Sixty-seven percent concentrated on natural gas and trading at a low McDep Ratio, XTO is a top choice for boosting portfolio participation in the growing production of U.S. natural gas as a positive consequence of rising energy price.

Originally published on June 17, 2008.