ExxonMobil Corp. plans to spend up to 18 months to set its revamped drilling priorities now that the takeover of XTO Energy Inc. is completed, CEO Rex Tillerson said Thursday.
The tie-up with the domestic natural gas giant was completed in June (see Daily GPI, June 28). Tillerson held court on a conference call with analysts to discuss the transaction.
"Now that we've got this in-house, we want to look at what are the optimization steps that could be taken," Tillerson said. "We don't have to be driven by all the aspects that XTO standalone was."
Nearly all of XTO's 3,300 employees joined ExxonMobil. Now a team at the former XTO headquarters in Fort Worth, TX, which has become a hub for ExxonMobil's unconventional gas and oil research, will spend up to 18 months to set drilling priorities, said Tillerson.
David Rosenthal, vice president of investor relations, joined Tillerson to talk about the merger. The purchase, Rosenthal said, increased ExxonMobil's outstanding shares by around 9%, or 416 million.
To ease the effects on shareholders, ExxonMobil is buying back $3 billion of its shares through August, Rosenthal explained.
The share buyback, which began in June, is to accompany a pay-off or refinance of XTO's assumed debt, which, when the all-stock then-$41 billion deal was announced last December, totaled close to $11 billion (see Daily GPI, Dec. 15, 2009).
Some of the old way of doing things at XTO has changed, said Tillerson. Among other things ExxonMobil is ending XTO's hedging practices to lock in prices on future production. ExxonMobil uses a "traditional yardstick" of return on capital, said Tillerson.
However, XTO was more efficient at drilling onshore gas and oil wells, such as those in the Permian Basin of West Texas, where ExxonMobil also explores. Those efficiencies are to be incorporated in the revamped unconventional arm of the company, said the CEO.
Purchasing XTO was a "long-term bet" that shale gas, coal seams and other unconventional resources will meet rising U.S. demand through at least 2030 as conventional well production declines, Tillerson told analysts.
In the XTO purchase, ExxonMobil acquired at least 45 Tcfe of recoverable gas on about 3.34 million U.S. acres. It also lured XTO's expertise into the fold to evaluate the potential of around 4.8 million acres that ExxonMobil already has accumulated outside the United States, Tillerson said.
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