Premier eFinance: Exxon Mobil to reduce natural gas drilling in Texas because of supply glut.

May 24, 2011 - PRLog -- Exxon Mobil Corp., which became the largest U.S. natural-gas producer after it acquired XTO Energy Inc. in 2010, says it is to scale back on drilling in its Texas gas fields as a result of weak prices.

The firm’s CEO, Rex Tillerson may be hard pressed at the May 25th annual meeting in Dallas to prove that the $34.9 billion XTO purchase, Exxon’s largest transaction since he became CEO in January 2006, hasn’t been a disaster.

Since the oil major completed the XTO acquisition on June 28, its share price has lagged Chevron Corp., ConocoPhillips and even BP Plc, the company responsible for the worst ever U.S. marine oil spill last year, Premier eFinance research indicates. All those companies have benefited to a greater degree than Exxon from strengthening oil prices.

“It’s a gas bet that obviously hasn’t worked yet,” Manuj  Nikhanj, an analyst at Calgary-based Ross Smith Energy Group Ltd told Premier eFinance sources,  “Exxon isn’t making any money off the commodity that XTO was known for.”

North American energy markets were flooded with gas after new drilling techniques enabled producers to tap into previously unreachable geologic formations. U.S. gas futures fell by as much as 30% in the months after the acquisition closed in June 2010, and have stayed down 7.7%.

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