XTO Energy is a Candidate for Acquisition (XTO, XOM)

Includes: XOM, XTO
by: Kurt Wulff

Buy-recommended XTO Energy (XTO) combines a rich natural gas resource base with a high performance record to offer investment exposure to the rising commodity value of clean fuel. The absence of costly hedges that expired at year end should boost 2006 revenue beyond that implied by futures prices. The stock has again nearly reached net present value that has been appreciating with natural gas. XTO’s takeover potential is less obvious than for peers, but could be real for a performance oriented acquirer.

XTO looks less like a takeover candidate on a McDep Ratio basis on current estimates than lower ranked peers. On the other hand, XTO has a superior record and has often outperformed from a higher McDep Ratio ranking. A performance oriented acquirer might readily be attracted to XTO. For example, XTO has an excellent working relationship with buy-recommended ExxonMobil (NYSE:XOM). The mega cap continues to own valuable North American properties readily susceptible to the exploitation that XTO does so well.

Originally published 05/01/06

Kurt Wulff's McDep Associates offers realtime, independent research services for investors in the energy and utilities sectors. For more information, go to www.mcdep.com or email Mr. Wulff at kurt@mcdep.com.