Are Big Oil's Acquisitions Just Starting?

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

ExxonMobil (NYSE: XOM  ) has long been considered the leader of the pack among the oil companies. So when it awakened us Monday morning with the news that it planned to use $31 billion of its treasury stock -- along with assuming $10 billion in debt -- to acquire Fort Worth independent gas and oil company XTO (NYSE: XTO  ) , most of us began to wonder who would be next.

By that, I mean we were trying to decipher who might stack up as both logical acquirers and the targets. The energy industry has become more and more divided through the years. There are the major integrated companies, which operate around the world and include refineries and often marketing outlets among their wares. And there are the independents that focus on exploration and production, both domestically and internationally.

I happen to believe that its increasing volumes and relative environmental friendliness will soon have us moving in the direction of the use of far more natural gas as a fuel source than traditionally has been the case. Just in the past few years independents like Petrohawk, Range Resources, and, yes, XTO have led the way -- along with the oilfield services companies -- in developing techniques that have made it possible to extract gas from unconventional sources, such as shale formations.

Now the majors have cottoned to the idea of gas's likely growth, hence Exxon's move on XTO, and almost certainly a string of acquisitions will occur behind it. Possible buyers might include the likes of Shell, Chevron (NYSE: CVX  ) , or BP (NYSE: BP  ) . Their targets could be any number of independents, including Canada's EnCana (NYSE: ECA  ) and a passel of other solid companies, such as Chesapeake (NYSE: CHK  ) ,

And the Justice Department willing, Exxon itself might still not be through once it digests XTO. Even after that deal, Exxon would have more than enough treasury stock remaining to buy super-major ConocoPhillips (NYSE: COP  ) . While that's an unlikely -- and almost certainly impossible -- combination, Exxon could nevertheless absorb another sizable independent.

So don't be surprised by a procession of acquisitions of independent producers by the major oil companies. Indeed, don't even be shocked if industry leader ExxonMobil continues to head up the parade.

ExxonMobil has been rated a four-star company by Motley Fool's CAPS players. Does that rating include your vote?

Fool contributor David Lee Smith doesn't have financial interests in any of the companies named above. He does welcome your comments. Chesapeake Energy is a Motley Fool Inside Value recommendation. The Fool owns shares of Chesapeake Energy and XTO Energy. Try any of our Foolish newsletters today, free for 30 days. The Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (12)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1069008, ~/Articles/ArticleHandler.aspx, 10/23/2016 10:17:32 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 2 days ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:00 PM
XOM $86.62 Down -0.59 -0.68%
ExxonMobil CAPS Rating: ****
BP $36.25 Up +0.20 +0.55%
BP CAPS Rating: ****
CHK $6.68 Down -0.23 -3.33%
Chesapeake Energy CAPS Rating: ***
COP $41.54 Up +0.05 +0.12%
ConocoPhillips CAPS Rating: ****
CVX $101.30 Down -0.57 -0.56%
Chevron CAPS Rating: ****
ECA $11.07 Down -0.23 -2.04%
EnCana CAPS Rating: ****
XTO.DL $41.81 Down +0.00 +0.00%
XTO Energy, Inc. CAPS Rating: *****