NEW YORK/HOUSTON Exxon Mobil Corp (XOM.N) said it bought privately held natural gas company Phillips Resources and related company TWP Inc for $1.69 billion last week, picking up about 317,000 acres for exploration in the Marcellus shale basin.
The action highlights the importance Exxon is placing on natural gas assets after spending about $30 billion last year to buy natural gas company XTO Energy, adding one of the leading developers of shale gas and a resource base of 45 trillion cubic feet of gas equivalent.
Exxon has shelled out billions to build up its exposure to so-called "unconventional resources", formations like oil and gas shales that require more advanced technology for extraction.
"We believe that the mergers will create significant value by leveraging regional synergies in upstream operations and acreage holdings between XTO Energy Inc and the Phillips Companies," said Alan Jeffers, an Exxon spokesman.
Exxon, already the largest producer of natural gas in the United States, said the two companies had proved reserves of 228 billion cubic feet equivalent of natural gas. The Phillips companies produce about 50 million net cubic feet per day of natural gas.
At a shareholders meeting last month, Exxon's Chief Executive Rex Tillerson said his company was "positioned to double our US unconventional production over the next decade with an inventory of approximately 50,000 drillable well locations."
Exxon has said it is taking a long-term view of natural gas markets, betting that power generation in developing countries like China and India will cause demand for the cleaner-burning fuel to surge in coming years.
Natural gas prices have been burdened by heavy supplies and have not closed above $5 per million British thermal units in New York trading in nearly a year, while crude oil has soared above $100 per barrel.
Last year, Exxon paid around $700 million to buy Ellora Energy, picking up that company's position in the Haynesville shale in Louisiana and Texas.
Exxon's XTO unit will manage the assets. The company said its goal was to retain the companies' employees.
(Additional reporting by Matt Daily; Editing by Robert MacMillan and Tim Dobbyn)