T. Boone Pickens must be smiling as Exxon makes US$30-billion bet on gas

Exxon Mobil Corp will buy XTO Energy Inc in an all-stock transaction valued at about US$30-billion. The bid that thrusts the oil giant to the forefront of North America's fast-growing natural gas industry. Exxon gains a major foothold into North America's newest energy discoveries as it bets on the growth of natural gas expanding its share of the world's largest energy market.

The bid spurred expectation of a wave of consolidation in the energy sector as cash-rich companies such as Exxon move to snap up smaller players with attractive assets. This deal is valued at US$41-billion, including about US$10-billion in XTO debt.

XTO is one of the leading developers of unconventional natural gas resources, such as shale gas, which have emerged as a potentially huge new resource play in North America. Exxon is making a bullish statement about natural gas prospects by making this acquisition.

Natural gas is trading at historical lows. U.S. natural gas prices have been under pressure as inventories of the fuel rose to record high levels, but prices have begun to firm in recent weeks as winter temperatures tap into those stockpiles. The purchase would increase the company's resource base about 10%.

Natural gas

Pickens has been speaking out on the issue of peak oil, claiming that world oil production is about to enter a period of irrevocable decline. He has called for the construction of more nuclear power plants, the use of natural gas to power the country's transportation systems, and the promotion of alternative energy. Pickens' involvement with the natural gas fueling campaign is long-running. He formed Pickens Fuel Corp. in 1997 and began touting natural gas as the best vehicular fuel alternative because it is a domestic resource that, among many advantages, is cleaner-burning (Natural Gas Vehicles or NGV's emit up to 30% less pollution than gasoline or diesel vehicles) and reduces foreign oil consumption. Reincorporated as Clean Energy Fuels Corp. in 2001, the company now owns and operates natural gas fueling stations from British Columbia to the Mexican border.

source: online Reuters and Wikpedia