Exxon bulking up on U.S. gas assets

Jack Williams, President of Exxon Mobil's XTO subsidiary answers questions as he participates in the Reuters Energy Summit in Houston June 14, 2011.

HOUSTON (Reuters) - Exxon Mobil Corp (XOM.N) is taking advantage of low natural gas prices by acquiring acreage in shale basins around the United States as it leverages drilling expertise from its purchase of XTO Energy Inc, a senior company executive said on Tuesday.

Unrest in the Middle East and North Africa helped push crude oil prices over $100 per barrel while huge supplies of natural gas have depressed prices in that market.

The price disparity has prompted many smaller energy companies to shift spending to oil drilling, paving the way deeper-pocketed Exxon to swoop in and strike good deals for natural gas assets.

"We think the market dynamics are set up to where you can potentially get good value, so we will continue to look," Jack Williams, president of Exxon's XTO unit, told the Reuters Global Energy and Climate Summit.

Exxon bought natural gas company XTO a year ago for $30 billion in a wager that demand for natural gas will rise in coming years as electricity consumption increases. The deal has been criticized by investors for creating earnings dilution, but Exxon is growing XTO through the purchase of hundreds of thousands of shale gas acres which were once too costly to drill.

XTO MARKS THE SPOT

Since the deal closed last June, Williams told Reuters that Exxon's XTO has added 13 trillion cubic feet of natural gas it expects to produce, bolstering the 60 trillion cubic feet of gas reserves already the unit already has on the books.

Exxon's appetite for gas assets has grown quickly. Earlier this month it completed a $1.7 billion purchase of acreage in the Marcellus Shale in the eastern United States. In that deal, the company purchased 317,000 acres for about $5,000 per acre, below the average price of about $6,000 per acre, according to Houston-based energy investment bank Simmons & Co.

The Irving, Texas company has also picked up other parcels ranging from 5,000 acres to 10,000 acres in basins including the Haynesville Shale in Louisiana and the Fayetteville Shale in Arkansas, Williams said.

The expansion is fueling the need for workers. Exxon's XTO unit has so far added about 400 jobs since the merger was completed, bringing the business' payroll to 3,700, Williams said.

Other companies seeking to capitalize on higher crude prices are spending richly to acquire acreage in hot spots like the Eagle Ford Shale in South Texas. That activity has driven the price per acre up to $20,000 per acre, a price too rich for Exxon, Williams said.

"When we see some reasonable value, we'll look harder," Williams said.

Exxon has some rigs in drilling for oil and natural gas liquids in the Eagle Ford and Permian basin, Williams said, adding that the company is drilling profitably for gas in basins like the Barnett Shale in North Texas.

"We'll continue to look at liquids plays but we're not running from gas plays either," the executive said.

Shares of Exxon closed up $1.15, or nearly 1.5 percent, to $80.38 in afternoon New York Stock Exchange trading.

(Additional reporting by Braden Redall, Michael Erman, Chris Baltimore, Kristen Hays, Ernest Scheyder and Matt Robinson in Houston)