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ExxonMobil Grabs More Marcellus Acreage

ExxonMobil Corp. confirmed late Wednesday that it paid $1.69 billion earlier this month to acquire two related Pennsylvania-based natural gas producers that operate in the prolific southwestern corner of Marcellus Shale.

The June 2 acquisition of Phillips Resources Inc. and TWP Inc., both based in Warrendale, adds about 317,000 net acres to ExxonMobil's Marcellus portfolio, which gives the supermajor an estimated 700,000 net acres in the play, said spokesman Alan Jeffers.

The merged companies currently produce about 50 MMcf/d net in the Marcellus and have proved reserves of about 228 Bcfe. In addition the producers also have prospective acreage in Michigan, Ohio and West Virginia.

"We believe that the mergers will create significant value by leveraging regional synergies in upstream operations and acreage holdings between XTO Energy Inc. and the Phillips Cos.," said Jeffers. "We think there are good opportunities" in the transactions.

ExxonMobil completed its acquisition of domestic shale giant XTO last year and made it a subsidiary that is based in Fort Worth, TX (see Daily GPI, June 28, 2010). XTO, which had a leasehold in every major shale play prior to the ExxonMobil takeover, began acquiring Marcellus acreage in 2008 (see Daily GPI, April 16, 2008; July 23, 2008).

Privately held Phillips and TWP, which also does business as T.W. Phillips Gas & Oil Co., would become part of XTO, Jeffers said. Some ExxonMobil staff plan to move into the companies' Warrendale office space. Most of the merged companies' 200 employees would be retained.

The acquired companies at one time were part of T.W. Phillips, a Butler County, PA-based natural gas utility, which was acquired in May by California-based SteelRiver Infrastructure Fund North America LP.

Phillips, which has been operating in western Pennsylvania for 35 years, owns or operates more than 4,000 producing gas wells in the state. It has actively drilled in both shallow conventional formations, as well as in the Marcellus Shale. To date the independent, which is a member of the Marcellus Shale Coalition, has drilled more than 50 vertical and horizontal wells in the shale play.

At the end of 2010 ExxonMobil reported that it held 15.3 Bcf of proved reserves in the United States alone.

Business for ExxonMobil's North American natural gas trading arm has soared since the XTO merger. According to NGI's 1Q2011 Top North American Gas Marketers Ranking, the producer marketed 4.37 Bcf/d in the first quarter, which was 130% higher than in the year-ago period (see Daily GPI, June 9).

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