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XTO Energy (NYSE: XTO), a major oil and natural gas producer, has agreed to shell out $4.2 billion for privately held Hunt Petroleum. The deal is expected to add about 1.052 trillion cubic feet of natural gas reserves, located primarily in Texas, Louisiana and the Gulf Coast, to XTO's supplies.
XTO has been quite acquisitive lately. Only in late May, XTO agreed to pay $1.85 billion for Headington Oil Co., which may have 4.3 billion barrels of recoverable oil.
Yes, such deals are a wonderful way to bulk up for growth. Actually, XTO is projecting production growth of 28% to 30% for this year.
As for Hunt Petroleum, it's a legend in the oil business -- going back 80 years. But late last year, the board retained Goldman Sachs (NYSE: GS) to seek out a buyer (I'm sure the Hunt family was looking for some liquidity, especially in light of the surging energy market).
And so far, Wall Street likes the deal. In today's trading, XTO's shares are up 3% to $69.93.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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