Exxon Sees the Bottom? | Russell T. Rudy Energy LLC
ExxonMobil is well known for financial conservatism and exhaustive analysis. The company announced that it has recently acquired 48,000 acres offsetting properties operated by its domestic subsidiary, XTO Energy, Inc.
This acquisition, via two separate transactions, is not big news in and of itself. XTO already has 1.5 million acres in the Permian basin, which produce approximately 115,000 barrels of oil equivalent per day. The unit is already running 11 horizontal and 4 vertical rigs in the area. However, given Exxon’s previously cited reputation, some industry observers see these purchases as an indication that Exxon believes oil prices are bottoming out.
However, Exxon has already added over 135,000 net acres in the Permian basin since January 2014, and has realized significant cost reductions by adding acreage next to existing operations. These recent additions are also in the Midland and Martin counties, Texas, in the core of the Midland Basin. Further, XTO already has experienced great success with the Wolfcamp, and now Sprayberry, formations which are stacked on top of each other in this area. All of these factors can be seen as mitigating the risk of these transactions. This move also makes sense when one considers that XTO has already boosted shale output by 20% since last year.
It would seem that these relatively small acquisitions for Exxon individually make sense for the operator, and should not be seen as indicative of a major shift in strategy.
I used information from two different articles to prepare this post. To read them in their entirety, please go to http://www.rigzone.com/news/article.asp?hpf=1&a_id=140012&utm, and http://www.worldoil.com/news/2015/8/07/exxon-mobil-increases-position-in-permian-basin .
