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.