|
·
|
The agreement
brings together two highly complementary organizations whose combined
strengths will deliver strong shareholder value and open new opportunities
for the production of clean-burning natural
gas.
|
|
·
|
Under the terms of the agreement,
approved by the boards of directors of both companies, ExxonMobil has agreed to issue
0.7098 common shares for each common
share of XTO. This represents a
25 percent premium to XTO stockholders. The transaction value includes $10
billion of existing XTO debt and is based on the closing
share prices of ExxonMobil and XTO on December 11,
2009.
|
|
·
|
We have no current plans to dispose of any
assets. However, we have an ongoing asset
management process by which we continually evaluate
all assets.
|
|
·
|
Completion of
the transaction is expected in the second quarter of
2010.
|
|
·
|
The transaction is structured as a
tax-free exchange of shares.
|
|
·
|
We expect the agreement to be
accretive to
production growth and cash flow.
|
|
·
|
Depending on the market price for gas, it is not likely to be accretive to near-term earnings per share and may be dilutive. |
|
·
|
Legally, the agreement is
structured as a merger.
|
|
·
|
This
agreement is good news for the United States as it will help produce more
of America’s own clean-burning natural gas, which brings with it
innovation, technology, investment and
jobs.
|
|
·
|
ExxonMobil’s
Energy Outlook indicates that gas will grow more rapidly than any other
major energy source given its availability and relatively low carbon
profile.
|
|
·
|
We believe
gas is the fuel of choice for power generation where it will increasingly
replace coal. Natural gas produces fewer greenhouse gas emissions than
other electrical-generation fuels, such as
coal.
|
|
·
|
Technological
advances have allowed industry to define 80 to 100 years of natural gas
resource in the U.S. at current production
rates.
|
|
·
|
The agreement
has resulted from an ongoing, disciplined evaluation of timely investment
opportunities to create value for shareholders. It is consistent with
ExxonMobil’s business model, which is focused on sustainable, long-term
value creation.
|
|
·
|
ExxonMobil’s
primary focus is on maximizing value for our shareholders. We
are interested in the best oil and gas
opportunities.
|
|
·
|
All of our
projects are evaluated on their own merits. This deal does not preclude
any other opportunities.
|
|
·
|
We are
constantly monitoring potential opportunities that can add value for
shareholders.
|
|
·
|
We believe we
are well positioned should further good opportunities present
themselves.
|
|
·
|
While ratings
decisions are ultimately made by rating agencies, our approach to this
transaction is consistent with financial principles underlying
ExxonMobil’s long-standing AAA rating and superior access to financial
markets.
|
|
·
|
As an
all-share transaction, there will be no new acquisition debt or use of
cash associated with the agreement. ExxonMobil’s consolidated balance
sheet will reflect the debt currently on XTO’s balance sheet but it will
not make an appreciable change in ExxonMobil’s all-in leverage ratio,
which is a key metric for the rating
agencies.
|
|
·
|
Regarding
potential debt repayment, we will do a complete analysis of our options
using our long-standing principles of focusing on shareholder value and
maintaining a conservative capital
structure.
|
|
·
|
Investing wisely in attractive energy opportunities is our first priority.
|
|
·
|
When we have paid our
expenses,
paid taxes to
governments and invested in all of the projects that meet our investment
criteria, we pay a
dividend and where
appropriate,
return cash to our shareholders through
buybacks so that they can redeploy it in the
economy.
|
|
·
|
We are not going to speculate on future
share repurchase plans.
|
|
·
|
Under SEC rules, we are precluded from repurchasing
shares during XTO’s proxy solicitation
period.
|
|
·
|
We will
account for this transaction as a purchase, consistent with US GAAP
rules.
|
|
·
|
US GAAP
requires the asset and liabilities acquired to be recognized at fair
value. The difference between the fair value of the assets and
liabilities, associated deferred taxes and the purchase price is
recognized on the books as
Goodwill.
|
|
·
|
Pro-forma
financials are not required. In the first period after closing, combined
financial results will be provided.
|
|
·
|
We expect
that the principal and interest obligations to the holders of XTO bonds
will continue to be honored after the transaction
closes.
|
|
·
|
The XTO
business model used hedging to ensure more stable, predictable cash
flow. This is a reasonable and common practice for smaller
companies. Given ExxonMobil’s financial strength and diverse portfolio,
this will not be necessary.
|
|
·
|
XTO is a
leading U.S. unconventional natural gas producer and has large,
high-quality resources, strong technical capabilities, operating expertise
and highly skilled employees.
|
|
·
|
It was
founded in 1986, is headquartered in Fort Worth Texas and has
approximately 3,000 employees, all in the United States. About one-third
are in Fort Worth and the remainder are in the field or in district
offices.
|
|
·
|
XTO’s
resource base is the equivalent of 45 trillion cubic feet of gas. Proved
reserves are the equivalent of 13.9 trillion cubic feet (2.3 billion oil
equivalent barrels). Gas represents over 80 percent of XTO’s production
and reserves.
|
|
·
|
XTO is a top
gas producer in the United States and currently produces about 2.4 billion
cubic feet per day (Q3-09 total). That represents approximately four
percent (4.2%) of current daily U.S. natural gas production (57 BCFD
Q3-09).
|
|
·
|
XTO has a
proven ability to profitably grow production and reserves. XTO has
averaged more than 20 percent growth in annual production since
1993.
|
|
·
|
XTO’s
portfolio is largely unconventional and includes tight gas, shale gas,
coal bed methane and shale oil. It is geographically focused in all the
major U.S. unconventional plays.
|
|
·
|
XTO has a
shale gas position in the Barnett shale in North Texas, Haynesville in
East Texas and western Louisiana, Woodford and Fayetteville in Oklahoma
and Arkansas respectively, and Marcellus shale in Pennsylvania and West
Virginia. XTO has a tight gas position in the Freestone Trend in East
Texas and in the Uinta Basin in the Rockies. Also in the
Rockies, they hold tight gas and coal bed methane acreage in the San Juan-
Raton Basin.
|
|
·
|
XTO produces
shale oil from the Bakken Shale in the Williston Basin in Montana and
North Dakota.
|
|
·
|
ExxonMobil’s
resource base of the equivalent of 72 billion barrels of oil is
geographically diverse. Proved reserves are 22.8 billion oil equivalent
barrels. Unconventional gas currently makes up about seven
percent.
|
|
·
|
ExxonMobil’s
current U.S. natural gas production is about 1.3 billion cubic feet of gas
per day (Q3-09) or about two
percent (2.2%) of daily U.S. natural gas
production (57 BCFD Q3-09). Worldwide, ExxonMobil produces
about 8.7 billion cubic feet per
day.
|
|
·
|
XTO’s assets
will complement ExxonMobil’s U.S. unconventional holdings in Piceance and
Marcellus, as well as the Horn River Basin in Canada and acreage in
Germany, Poland, Hungary and
Argentina.
|
|
·
|
When combined
with XTO’s production, ExxonMobil will produce about six percent (3.7 BCFD or 6.4%) of current U.S. daily natural gas production (57 BCFD).
|
|
·
|
When
combined, ExxonMobil’s total natural gas volumes are expected to represent
approximately 45 percent of ExxonMobil’s total production, slightly higher
than today’s mix.
|
|
·
|
When
combined, ExxonMobil’s unconventional resource portfolio will contain
nearly 8 million acres worldwide. This does not include our very large
heavy oil assets.
|
|
·
|
XTO has
expertise in tight gas, shale gas, shale oil and coal bed
methane.
|
|
·
|
XTO’s
employees are very important to the success of this agreement. They bring
the ability to enhance our global operations through the vast experience
they have gained in domestic
operations.
|
|
·
|
While we of
course will look for efficiencies, that is not what is driving this
agreement. XTO’s employees are recognized for their technical excellence
and will be critical in the success of this global unconventional resource
organization. Our intention is to retain most of XTO’s
employees.
|
|
·
|
Following
closure of the transaction, our plan is to establish a new ExxonMobil
organization to manage global development and production of unconventional
resources. It will be based in Fort Worth in XTO’s current
offices.
|
|
·
|
The new
organization will build on the strengths of both companies. It will be a
global functional company designed to manage our quality unconventional
portfolio.
|
|
·
|
The new
organization should enable the rapid development and deployment of
technologies and operating practices across our global portfolio to
maximize resource value.
|
|
·
|
XTO’s skills
and capabilities when combined with ExxonMobil’s advanced R&D and
operational capabilities, global scale and financial capacity, should
enable development of additional supplies of unconventional oil and gas
resources, benefiting consumers both here in the United States and around
the world.
|
|
·
|
ExxonMobil is
committed to safety, environmental protection and efficiency and will
employ those corporate values in the development of these
resources.
|