Exxon completed the purchases of Phillips Resources Inc., based in Warrendale, Pennsylvania, and TWP Inc. of Butler, Pennsylvania, on June 2, Alan Jeffers, an Irving, Texas-based spokesman at Exxon, said in a phone interview yesterday. The 200 employees at the two companies may be retained, he said.
Exxon paid $34.9 billion for XTO Energy last year, making it the biggest U.S. gas producer. The acquisition of Phillips Resources and TWP gives Exxon access to 317,000 acres in the Marcellus Shale, a gas-rich geological formation that stretches beneath several eastern states including New York, Pennsylvania and West Virginia.
“The fact that Exxon is buying in now is a vote of confidence in shale in the U.S.,” Tony Regan, a Singapore-based consultant at Tri-Zen International, said by telephone today. “There had been a feeling that activity might have peaked a bit. Exxon is a big, cautious company, and they wouldn’t have rushed into this.”
Global energy producers such as Total SA (FP) and BHP Billiton Ltd. are investing in shale formations impervious to traditional drilling methods. In the past 10 years, U.S. drilling engineers adapted decades-old hydraulic-fracturing techniques to free gas from dense shale rock, unleashing new supplies that have glutted the North American market and depressed prices.
U.S. gas futures have lost 69 percent of their value since peaking at $15.78 per million British thermal units in December 2005, amid a surfeit of supply from shale formations in Texas, Louisiana and Arkansas. The New York-traded futures closed at $4.85 per million Btu yesterday.
Shares of Exxon rose 31 percent in New York trading in the past year, beating a 22 percent gain in the Standard & Poor’s 500 Index. The stock climbed 57 cents, or 0.7 percent, to $81.33 at 12:25 p.m. in New York Stock Exchange composite trading.
Exxon’s XTO unit will manage Phillips Resources and TWP, which held combined reserves equivalent to 228 billion cubic feet of gas at the end of 2010, Jeffers said.
Shale formations have the potential to more than double the world’s gas reserves, the U.S. Energy Information Agency said in an April 5 assessment. The U.S. has an estimated 827 trillion cubic feet of shale gas and it may account for 47 percent of the nation’s production of the fuel by 2035, the agency said.
Acquisitions in the shale industry are set to continue, with “vulnerable smaller guys being taken out” as they face higher costs and increased regulation, Tri-Zen’s Regan said.
To contact the reporter on this story: Joe Carroll in Chicago at firstname.lastname@example.org
To contact the editor responsible for this story: Susan Warren at email@example.com.