bring a debit card with no limit. The XTO Energy deal is worth $31b.
That represents nearly 10% of the market cap for XON. They paid a
premium of 25% to get it done. That is a measure of how much this deal
meant to them.
You can be sure that this deal was looked at every which way before CEO
Tillerson said yes. There was a lot of that ‘deep thinking’ going on.
At the end of the day I think it was as easy as looking at the futures
market.
The closing futures prices for Nat Gas yesterday were as follows:
The year over year price differential is $1.568. That is a premium over the near month of 29%.
That is a very big number. There are a number of contributing factors
to this premium. The most significant of which is the lack of storage
capacity and a big enough balance sheet to finance it. No doubt but
that the good folks at Exxon will be earning a significant portion of
that premium in the years to come.
I have never been a big proponent of the thinking that the futures
market is a good indicator of where cash prices are headed. However, in
this case the futures market may be telling us something.
Another way of looking at the forward premium on Nat Gas is as a cost
of ownership. When something costs you 29% a year to own you are not
likely to own it. A condition like that is one that leads to shortages
and sharp spikes in prices. That would be good for Exxon, bad for just
about everyone else however.
deal was all stock.
XOM is the world's best bank.
have yet to sift through details but if bob simpson isn't exclusively retained by exxon then i would expect him to be either taking over or simply functioning as an IB consigliere for a mid cap natty E&P play in the powder river basin.
and hat's off to mr. simpson; a true steward of capital.
Look where many of those reserves are...the Marcellus.
That's right near lots of population. The costs of production are low. There is a huge market nearby for heating and more natural gas electric plants can be built.
Natural gas burns cleaner than coal, so it works well for future regulations.
Compared to current oil prices, its a massive btu bargin.
To me, this is just a long-term value play. They are buying it now, while cheap.
Eventually more customers will come. Volume of sales and then prices will eventually rise. Exxon has said this.
I have been thinking about this play for the past 6 months. I feel stronger about it now.
Time to start trading nat gas.
Once Nat Gas stops being an asset class and resumes being a commodity, I suspect the price will drop to reflect the current supply glut. Exxon got snookered. It'll probably take a couple of years for them to realize this. Ha Ha.
The seller always knows more than the buyer. Maybe recent environmental concerns over the Barnett Shale required a deeper legal team.
Did XOM buy XTO to close out their huge short natgas futures positions?
Rex smells cap&trade acommin'. Keep the cash and get me some gas!
(disclosure: long XOM)
Rex is keeping the cash. Smells cap & trade a commin'. Lots of green for the auctions and some nat. gas for the needy. Long live the Rex.
(disclosure long XOM)
I don't know about Exxon. But Chevron had 0 CDS exposure at crash time in 08.
Wall Street hates it when Big oil pays with cash!
Futures are Casino, ever manipulated for windfall profits by the insiders. What has been good for the Casinos, has been just as bad for everyone else. -enjoy your crumbs.....
XOM is more than physical oil, gas, chemistry, and green energy.
What is XOM besides oil, gas, chemistry?
Dinosaurs.
-- Jeff Skilling
Inmate # 70723