XTO Energy President Jack Williams recently revealed a fondness for "bolt-on transactions," which are the purchase of assets adjacent to Exxon's existing assets. He added about the U.S., "We think the market dynamics are set up to where you can potentially get good value, so we will continue to look." Exxon management has also expressed interest in natural gas liquid acquisitions because NGLs are currently more profitable than shale gas. Natural gas varies in its composition around the world from normally 80% to 95% methane with the rest composed of natural gas liquids propane, butane, and other hydrocarbons.
So those are Exxon's criteria. Now let's look at some companies that make the cut.
Exxon could be looking to add assets in the Barnett shale. The Barnett shale was the original shale gas play. However, many in the energy industry believe the Barnett is past its production prime. But Exxon doesn't.
According to company execs, the Barnett is one of Exxon's most profitable gas fields. Management also believes the region has years of significant productivity left. It's no wonder Exxon is committing more resources to the area. A Barnett-related acquisition could be in the offing, and Quicksilver Resources
First, Quicksilver owns a considerable amount of productive acreage adjacent to Exxon's assets in the Barnett. This makes Quicksilver's assets a perfect bolt-on transaction for Exxon.
The second reason is that much like recently acquired Petrohawk Energy, Quicksilver lacks financial footing to weather a prolonged period of depressed natural gas prices. This makes the company a prime takeover target.
Exxon could be interested in gaining additional exposure to the Haynesville shale. Last year, Exxon increased production in the region fourfold, indicating an increasing interest in exploring the area.
A company of interest in the Haynesville could be EXCO Resources
EXCO also appears to be undervalued; at least that's what the CEO thinks. The CEO recently attempted to buy the company at nearly a 25% premium to its recent share price. However, the deal eventually fell through.
EOG also holds a sizable position in the Eagle Ford shale with a varied production mix, which includes natural gas liquids. The company also has operations in China, aka, the sleeping giant of shale gas.
The bottom line
Exxon is shopping for more natural gas, and speculative investors should take note. Many companies may match Exxon's criteria with some more perfectly than others. And it's reasonable to think Exxon will use its massive financial resources to make multiple acquisitions. Take a look at some of these names and others as well for potential investment opportunities.
- Add ExxonMobil to My Watchlist.
- Add Quicksilver Resources to My Watchlist.
- Add EXCO Resources to My Watchlist.
- Add EOG Resources to My Watchlist.
- Add Provident Energy to My Watchlist.
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Fool contributor Adam J. Crawford does not own shares in any company mentioned in this article. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.