Weekly Energy Report: ExxonMobil gains muscle, influence in Fayetteville Shale

The thought of a corporate behemoth settling in Arkansas with the size, breadth and market-moving influence of Wal-Mart would undoubtedly be big news.

Yet unbeknownst to most, oil giant ExxonMobil has quietly acquired huge stakes in Arkansas’s Arkoma and Fayetteville Shale plays when it purchased Fort Worth-based XTO Energy in late June in an all-stock deal worth $30 billion.

And many Wall Street analysts and energy experts say the XTO deal is a "game-changing" moment in the nation’s energy outlook, signaling a shift in the never-ending hunt for new energy sources.

What does that mean for Arkansas? It means XTO, now the third-largest natural gas producer in Arkansas, will now have the muscle, might and money of one of the world’s largest publicly-trade oil firm behind it.

In fact, ExxonMobil has been the only company in the past five years (2006 and 2009) big enough to replace Wal-Mart atop the Fortune 500. Exxon has also been the highest-earning company in the S&P 500 index over the past decade, following its acquisition of Mobil.

Rex W. Tillerson, chairman and CEO of ExxonMobil, said the agreement with XTO is good news for the United States as it will help produce more of America’s own clean-burning natural gas, which brings with it innovation, technology, investment and jobs.

"ExxonMobil’s Energy Outlook indicates that gas will grow more rapidly than any other major energy source given its availability and relatively low carbon profile," Tillerson said. "We believe gas is the fuel of choice for power generation, producing fewer greenhouse gas emissions than other electrical-generation fuels, such as coal."

Pulitzer Price winner Daniel Yergin, chairman of IHS Cambridge Energy Research Associates, told the New York Times that "these unconventional resources are going to take on an increasing role in our energy needs."

"This (XTO deal) demonstrates how important natural gas is now, seen as part of the mix for a low-carbon future," Yergin said.

By placing a bet on XTO, ExxonMobil is staking a big part of its future energy production on unconventional natural gas plays like Arkansas’ Fayetteville Shale, the Barnett Shale in Fort Worth, the Woodford Shale in Oklahoma and the fast-rising Marcellus Shale in Pennsylvania.

XTO’s resource base is the equivalent of 45 trillion cubic feet of gas and includes shale gas, tight gas, coal bed methane, shale oil and conventional oil and gas production. In 2008, XTO purchased 55,631 acres of shale interests in northeastern Arkansas from Southwestern for $519.6 million.

ExxonMobil said it does not plan to change XTO name and will retain nearly all of its employees. Still, it is clear that with the backing of the ExxonMobil global brand, XTO’s influence and investment in the Arkansas play will definitely get a big boost.

MOTOR FUEL MOVES
In other state energy news, pump prices for a gallon of regular unleaded gasoline are up compared to year ago prices. According to AAA’s daily Fuel Gauge report, Arkansas motorist are paying $2.58 per gallon for regular unleaded, compared to $2.33 a year ago.

Pump prices in Arkansas’ metropolitan areas range from a low of $2.593 per gallon in Pine Bluff to a high of nearly $2.617 in Northwest Arkansas. Retail prices in Little Rock are averaging $2.54 per gallon, while travelers to Fort Smith and Texarkana are paying about $2.597 and $2.616 per gallon, respectively, to fill up their tanks.

Nationwide, retail gasoline prices for regular unleaded are averaging about $2.72 per gallon, about 17 cents higher than a year ago, according to the Energy Information Administration. Retail diesel fuel prices increased  to $2.96 per gallon, up 2 cents compared to last week, and 34 cents higher than a year ago.

Meanwhile, a barrel of light, sweet crude oil for November delivery fell 62 cents to $74.09 in Thursday trading. Crude hit a one-month high earlier this week on the New York Mercantile Exchange at nearly $78 per barrel.