Oil and Gas

UPDATE 2-Exxon sees greater scrutiny after BP spill

* No long-term risk to natgas plans from BP spill - CEO

* Exxon U.S. natgas output about 3.7 bcf/day

* Shares down slightly (Adds additional details from call, byline)

HOUSTON, July 8 (Reuters) - Exxon Mobil Corp XOM.N, the largest U.S. oil company, expects heightened government scrutiny of the industry following BP Plc's BP.LBP.N well rupture, but sees no measurable risk longer-term for the company's natural gas exploration plans, CEO Rex Tillerson said on Thursday.

Exxon closed its $25 billion purchase of XTO Energy Inc on June 25, making it the largest natural gas producer in the United States.

“Over the next year or two as we are able to deal with the aftermath of the incident of the Gulf of Mexico, I think there will continue to be good recognition of how important these resources are and we will be able to still achieve everything we had set out to achieve,” Chief Executive Officer Tillerson said on a conference call with analysts to discuss Exxon’s purchase of XTO.

Even so, Tillerson cautioned it is too early to draw many conclusions about industry risk from the April 20 well rupture a mile deep in the Gulf of Mexico that killed 11 people and caused the worst environmental disaster in U.S. history.

So far, the U.S. government has focused most intently on offshore safety, but many in the industry believe that onshore drilling may also face stiffer regulations and greater opposition from environmentalists.

Exxon aims to use the XTO purchase to build a global unconventional natural gas exploration business as it bets on growing demand for that fuel. The combined company has more than 8 million unconventional acres around the world, including Argentina, Poland and Germany.

Unconventional resources include shale gas, which is natural gas trapped tightly in rock. To release the gas, techniques like hydraulic fracturing are needed to break the formation open.

For 2010, budgets for both companies remain unchanged. Exxon plans to spend about $28 billion, while XTO plans to spend about $4 billion, the company said on the conference call.

The deal nearly triples Exxon’s U.S. natural gas production to almost 3.7 billion cubic feet equivalent per day, the company told analysts.

While the XTO deal is expected to add to Exxon’s full-year 2010 production and cash flow, the 416 million shares issued in the deal will increase outstanding shares by 9 percent, Exxon said.

Shares of Irving, Texas-based Exxon edged down 0.09 percent to $58.38 on the New York Stock Exchange late Thursday afternoon. (Additional reporting by Matt Daily in New York; Editing by Gerald E. McCormick and Richard Chang)