During the first-quarter conference call, XTO Energy's
XTO is paying nearly $4.2 billion for privately held Hunt Petroleum, a big player in East Texas and Louisiana. XTO has had a remarkable run in the same region, and the firm has characterized its purchase of Hunt -- or at least, the 70% of its reserves in XTO's Eastern Region -- as a "super-charged bolt-on."
There are a lot of attractive plays in this area, so it would be oversimplifying things to characterize XTO's purchase as a move on the Haynesville shale. Still, this early-stage natural gas play has Chesapeake Energy
As various analysts have pointed out, the Hunt acquisition looks a bit expensive in terms of proved reserves. On a cash flow basis, XTO is only paying a low single-digit multiple, and its cash flow expectations are enforced by a 28-month hedge on half of Hunt's natural gas production. Add in the fact that XTO sees the possibility of at least doubling reserves, and the acquisition doesn't look terribly pricey.
Another thing worth mentioning is the blistering pace of XTO's development plan. In 2009, the firm targets 20% production growth (a lowball, in my view), with 110 to 120 operated rigs running. At the midpoint, that's 37% higher than the first-quarter rig count. This oil patch percolation is part of what keeps me bullish on drillers like Nabors Industries