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UPDATE: XTO Energy to buy private firm Hunt Petroleum for $4.2B in cash/stock
06.10.08, 11:14 AM ET

Adds background, latest share price

NEW YORK (Thomson Financial) - XTO Energy (nyse: XTO - news - people ) Inc. Tuesday said it's agreed to acquire privately-held Hunt Petroleum Corp. and related entities for roughly $4.2 billion in cash and stock. The deal continues a pattern for the company, which has announced two other purchases since mid-April as it works to boost the volume capabilities and geographic reach of its production base with oil still close to record highs.

Under the terms of the agreement, XTO will pay $2.6 billion in cash and 23.5 million shares of its common stock. The stock component of the deal is valued at $1.6 billion, or $67.50 a share, slightly below Monday's closing price of $67.72.

The company said the deal, which it expects to close on or before Sept. 3, would add 197 million cubic feet of natural gas, 8,500 barrels of oil and 2,300 barrels of natural gas liquids to its production base.

XTO shares responded favorably to the news, rising 1.7% to $68.90 in early trades. The stock has had a strong run in 2008, gaining about 34% since the start of the year.

XTO raised its 2008 production target after disclosing the intended purchase. The company now has a target for growth of between 28% and 30%, up from a previous view of 20% to 23%. Based on volume projections for 2008, the company also established an annual production growth target of 20% for 2009. In order to achieve this production growth, XTO is forecasting a preliminary 2009 development budget of $4 billion to $4.5 billion, using 110 to 120 operated drilling rigs.

'With acquisitions and our planned development work, we are targeting a production volume increase in 2009 of about 450 million cubic feet equivalent above the average rate in 2008,' said Bob Simpson, XTO's chairman and CEO, in a statement. 'This significant growth can be delivered with about 50% to 55% of the estimated cash flow at the current commodity price outlook.'

The Hunt Petroleum acquisition follows XTO's agreements to buy certain assets from Linn Energy and privately-held Headington Oil in the past two months.

The Linn Energy deal, announced April 15, cost XTO roughly $600 million. It included 152,000 net acres of Marcellus Shale leasehold in Pennsylvania and West Virginia, as well as other producing properties and infrastructure. XTO estimates the Linn assets will add about 25 million cubic feet of natural gas equivalent to its production base.

In the Headington deal, announced May 28, XTO agreed to pay about $1.85 billion for producing properties and undeveloped acreage in the Bakken Shale leasehold in Montana and South Dakota. The consideration was structured to include $1.06 billion in cash and 11.74 million common shares valued at about $790 million, or $67.35 per share. XTO said it would fund the cash portion of the deal through a combination of cash flow and commercial paper.

XTO estimated that the properties involvded in the Headington deal to have proved reserves of 68 million barrels of oil equivalent, 60% of which were proved developed, and that the deal would add 10,000 barrels of oil equivalent per day to its production base.

Also, in its Feb. 12 fourth-quarter report, XTO disclosed plans to buy $1 billion in producing properties from a number of unnamed partners in its Eastern and San Juan regions, as well as acreage positions in the Woodford, Fayetteville and Barnett shales. The deal was estimated to cover 212 billion cubic feet of gas equivalent in the purchase areas, of which 60% are proved developed.

Ryan Vlastelica



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