ExxonMobil Corp., now the biggest natural gas producer in the United States with its takeover of XTO Energy Inc. complete, will spend up to 18 months to set its revamped drilling priorities, CEO Rex Tillerson said Thursday.

The tie-up with the domestic natural gas giant was completed in June, tripling ExxonMobil’s U.S. gas volumes to around 3.7 Bcf/d from 1.3 Bcf/d (see NGI, 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.”

The purchase makes ExxonMobil a compelling gas competitor onshore: 425,000 net acres in the Marcellus Shale, 215,000 net acres in the Haynesville Shale and around 50,000 acres in the Eagle Ford Shale. The Irving, TX-based major also is the largest leaseholder in British Columbia’s Horn River Basin, where it has 300,000 net acres to explore.

But not everything that is now in ExxonMobil’s quiver will be explored, said the CEO. Some wells “will make sense and some will not.” For now, the company also won’t adjust its 2010 capital spending budget.

Nearly all of XTO’s 3,300 employees joined ExxonMobil. Now a team at the former XTO headquarters in Fort Worth, TX, now the hub for ExxonMobil’s unconventional gas and oil research, is working to review the oil major’s shale prospects, both domestic and worldwide.

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 NGI, Dec. 21, 2009a; Dec. 21, 2009b).

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 will let roll off hedges on about 1.25 Bcf/d hedged for 2010 and 250,000 Mcf/d for 2011.

ExxonMobil uses a “traditional yardstick” of return on capital and will use a “disciplined” approach in all of its efforts, said Tillerson.

“We’re very happy to take that exposure to price,” Tillerson said of dropping XTO’s hedges. “Our strategy will be to drill opportunistically and hold the acreage at a low price.”

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 more than eight million acres that ExxonMobil already has accumulated outside the United States, Tillerson said.

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