Washington (Platts)--14Dec2009/606 pm EST/2306 GMT

The fortunes of US shale producers were confirmed Monday with ExxonMobil's announcement that it would buy XTO Energy in the biggest US energy deal since Chevron bought Texaco in 2000.

In the deal, ExxonMobil would pay $31 billion in stock and assume $10 billion in XTO's debt.

"We expect that Exxon's purchase will set off a run by other supermajor oil companies to buy other US independent exploration-and-production companies that have heretofore been successful in the giant land grab in unconventional natural gas plays," said Buckingham research group analyst Robert Christensen.

While ExxonMobil said it wants the Fort Worth-based independent so the major can obtain the tools it needs to exploit a nearly 3 million acre leasehold of shale plays in Central Europe, South America and British Columbia, the purchase endorsed the view that shale gas has changed the natural gas game, analysts said.

Analysts at Tudor Pickering Holt said investors' big questions regarding the deal would be whether it kicks off a major consolidation trend and what company would also be in the crosshairs.

Credit Suisse analyst Jonathan Wolf said, "we believe Devon would be next in line for the majors to look at, given the restructuring in progress."

In November, Oklahoma City-based Devon announced it would sell billions of dollars worth of offshore fields and focus on North American unconventional gas plays. In addition Devon "trades cheap," at 5.7 times its anticipated 2010 earnings before taxes and debt, Wolf said. By comparison, ExxonMobil is paying 7.1 times 2010 earnings for XTO, he added.

News of the deal is "positive for North American shale plays and positive for US natural gas," said Wachovia analyst David Tameron.

"Biggest benefit will likely be the unconventional pure plays," he said. "This includes Chesapeake Energy, Southwestern Energy, Range Resources, [and] Petrohawk." "The US was a laboratory, with the learnings not only being applied in the US, but to shales globally," he said.

The founder and CEO of Oklahoma City-based Chesapeake Energy, which pioneered billions of dollars worth of joint ventures in US shale plays with supermajor BP and Norway's national oil company Statoil, said the deal validates US shale.

"We congratulate XTO on a terrific 20-year track record of success and we welcome ExxonMobil into the US deep shale business," Chesapeake's Aubrey McClendon said Monday. "This pending transaction is the latest and highest-profile validation of the future potential of deep shale natural gas plays to provide enormous new reserves of clean American fuel for Americans."

Chesapeake would not, however, discuss whether ExxonMobil or any other company had courted it.

XTO's shale drilling and hydraulic fracturing expertise will be combined with ExxonMobil's research-and-development capabilities, global scale and financial backing to form a "catalyst for long-term gas production" from unconventional resources around the world, ExxonMobil's Tillerson said.

Tillerson told analysts on the conference call that he didn't anticipate much in the way of cost savings because of "synergy" between the pair, instead the magic of synergy would play out by combining the two firm's strengths, not eliminating duplication.

Tillerson noted that ExxonMobil has the world's largest assemblage of unconventional natural gas acres, with 60% to be located outside the US when this deal is consummated in second-quarter 2010.

Tillerson was tight-lipped about many inside details of the $41 billion deal. He would not comment on how long ExxonMobil courted XTO, or what other shale producers the supermajor looked at. He did say ExxonMobil still had cash in the bank and would keep looking for more good deals.

Under the all-stock deal, ExxonMobil will exchange 0.7098 ExxonMobil shares for each share of XTO, valuing XTO at $51.69/share based on ExxonMobil's Friday closing price and representing a 25% premium for XTO shareholders, also based on Friday's closing price.

Tillerson said XTO wanted the deal to be all in stock, making it free at the corporate level from taxes that would have been levied on any cash portion of the deal.

In exchange, ExxonMobil will acquire 45.1 Tcf equivalent worth of crude oil, and conventional and unconventional gas reserves, almost all of which are in the US and heavily weighted towards natural gas.

Analysts Monday said ExxonMobil paid $2.95/Mcf equivalent for XTO's 13.9 Tcfe of proved reserves, a price that drops to nearly $1 Mcfe of proved, probable, and possible reserves which is again, heavily weighted to natural gas.

"There is a land grab," said Wachovia's Tameron. "And if there ever was a time to buy US natural gas, it would be now, while the fundamentals are weak and reflected in share prices. So, bottom line is, we would not be surprised to see some additional mergers-and-acquisitions activity."

--Bill Holland, bill_holland@platts.com