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How to Play Oil's Switch to Gas

David Lee Smith
January 4, 2011

For Big Oil leader ExxonMobil (NYSE: XOM  ) , 2010 nearly turned into the year of Big Gas.

After all, the price of crude oil has recently moved to about $94 a barrel, a level that not long ago appeared "way down the road." But crude's reaching higher prices sooner than expected these days, so I'm treating a recently published notion that gasoline prices will hit $3.50 a gallon by summer as excessively conservative.

But you've likely noted that 2010 was the year of big natural gas buys, especially by Exxon, which spent much of the year shopping for solid deals. For instance, a whopping $41 billion purchase (including debt) of gas producer XTO instantly turned Exxon from simply ranking as the world's biggest company to an added status as the largest U.S. gas producer.

Then, after closing its XTO deal, Exxon added Denver-based Ellora Energy to its gas collection at a cost of $695 million.

However, that wasn't the end for the big company. As most of us were heading for our holiday resp