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ExxonMobil Expands in Bakken Region

CHK DNR XOM

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Energy major ExxonMobil Corporation (XOM - Analyst Report) and its subsidiary, XTO Energy, entered into an agreement with Denbury Onshore, LLC, a subsidiary of oil and natural gas company Denbury Resources Inc. (DNR - Analyst Report), to acquire all of Denbury’s Bakken shale assets. The deal will also increase its production in the Bakken oil shale region.

In return, ExxonMobil will pay $1.6 billion in cash and is offering its stake in the Hartzog Draw field in Wyoming and Webster field in Texas to Denbury. Currently, the fields produce 3,600 net oil equivalent barrels per day of natural gas and liquids.

As per the deal terms, ExxonMobil will acquire 196,000 net acres in North Dakota and Montana. It is expected that the combined acreage will produce 15,000 barrels of oil and other hydrocarbons per day in the second half of 2012.

The deal will increase ExxonMobil’s stake by 50% in the Bakken shale region to 600,000 acres. XTO Energy will carry out operations at Bakken shale acreage.

ExxonMobil’s strength lies in its balanced operations, strong financial flexibility and continuous improvement on efficiency and cost control. The company’s efforts to build an unconventional resource portfolio both in North America and overseas aims at increasing production through increased exposure to large energy resources with long reserve life and low field declines.

Despite the collapse in natural gas prices, Exxon expects unconventional gas to play a dominant role in future supplies owing to the rapid decline in conventional production. The company possesses more than 8 million unconventional acres in North America.

ExxonMobil, the largest natural gas producer in the U.S., ahead of Chesapeake Energy Corporation (CHK - Analyst Report), carries a Zacks #3 Rank, which is equivalent to a Hold rating for a period of one to three months. Longer term, we maintain our Neutral recommendation.

 

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