Monday, June 13, 2011

Exxon expands position in Marcellus Shale thorough acquisition of two gas drillers for $1.69 billion

Exxon Mobil has acquired two gas companies Phillips Resources Inc and TWP Inc for $1.69 billion. The acquisition of Phillips Resources and TWP gives Exxon access to 317,000 acres in the Marcellus Shale. The two companies produce about 50 MMcf/d of natural gas and held proved reserves of 228 Bcf of natural gas as of year-end 2010.

According to the Phillips Resources website, the company has been in Western Pennsylvania for 35 years and has operated or participated in the drilling of more than 50 Marcellus Shale wells. It has approximately 250,000 net acres of land holdings.


Exxon’s recent activities in UNCONVENTIONAL SHALES
This Marcellus acquisition by Exxon Mobil has moved the company into the top five leaseholders in the natural gas play with more than 700,000 acres to explore. Exxon has shelled out billions to build up its exposure in unconventional resources. Here are the few examples..

In Q2-2010, Exxon paid $34.9 billion for XTO Energy, making it the biggest US gas producer. In Q3-2010, Exxon paid around $700 million to buy Ellora Energy, picking up that company's position in the Haynesville shale in Louisiana and Texas.

At a shareholders meeting last month, Exxon's Chief Executive Rex Tillerson said his company was "positioned to double our US unconventional production over the next decade with an inventory of approximately 50,000 drillable well locations."

A quick glance at the acreage metrics in Marcellus Shale
Exxon is believed to have paid $4,280/acre, after accounting $333 million for the reserves (based on $40,000/producing barrel or ~$9/proved boe). The price paid by Exxon is at a 50% discount when compared to the 2010 average metrics of $8,000/acre.

The following table shows few deals where high $/Acre was paid.



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