A year after Exxon Mobil's $36 billion acquisition of Fort Worth-based XTO Energy, the international oil giant and the independent natural gas producer are mobilizing to become a global leader in the shale gas revolution that began with the Barnett Shale in North Texas.
Jack Williams, a 47-year-old Exxon Mobil veteran, took the reins of XTO upon the June 25, 2010, completion of the merger. XTO, now a wholly owned subsidiary of Irving-based Exxon, has continued to base its operations in downtown Fort Worth.In a Star-Telegram interview last week, Williams said he is "absolutely thrilled" to lead XTO and believes the marriage of the two companies provides "a pretty powerful combination," pairing XTO's expertise in shale with Exxon's unparalleled finances, research and technology capabilities and massive global presence."Basically, you have a combination nobody else has, which I think gives us a tremendous competitive advantage when it comes to developing these shale plays globally," he said.Exxon prized XTO for its U.S. resource base, equivalent to 45 trillion cubic feet of natural gas, roughly double U.S. annual consumption. It also made Exxon the largest U.S. gas producer.Just as importantly, Exxon wanted XTO's know-how when it came to extracting unconventional gas deposits from dense shale formations via horizontal drilling and hydraulic fracturing, Williams said.XTO "is involved in pretty much all the major shale plays," he said. It has "as much or more experience than anybody else out there on how these shale plays work and what it takes to be successful," he said.Worldwide projectsXTO employees have participated in "numerous technical reviews of unconventional projects" Exxon is evaluating in Canada, South America, Europe and Asia, Williams said. Coupled with XTO's shale savvy is the fact that, in most countries where shale-gas drilling is being considered, Exxon "already has a presence" and has established "productive relationships," Williams said.For example, Exxon is eyeing such drilling in Germany, where it is the top gas producer. Exxon holds six exploration licenses in Germany, covering 3.2 million acres. An XTO technical team recently visited there.On the downside, Germany has imposed a moratorium on hydraulic fracturing (fracking), Williams said. Several nations have adopted or are considering moratoriums until more study is done to determine whether fracking contributes to groundwater contamination.The budding international shale plays will develop more slowly than in the U.S., Williams said. "They're not going to go from zero to 5 billion cubic feet a day [of gas production] in four to five years like they did in the Barnett."Exxon and XTO already are busy in major U.S. natural gas and oil shale fields, including the Barnett, Fayetteville (Arkansas), Haynesville (East Texas and Louisiana), Marcellus (Pennsylvania), Bakken (North Dakota), Eagle Ford (South Texas) and Woodford (Oklahoma)."You hear a lot about the Haynesville, the Eagle Ford, the Bakken and the Marcellus," Williams said. "But the Barnett stacks up very well, from the standpoint of economic returns, with those other plays." XTO has "a very attractive acreage position" in the Barnett, with most of its 200,000-plus acres in the area's core, Williams said, where the company's Barnett unit is a "finely tuned machine."'Deep inventory' in Barnett ShaleXTO has slashed its Barnett well-drilling time from 28 to 14 days, even though newer wells generally have longer "laterals," or horizontal legs, Williams said. XTO has about 2,000 producing Barnett wells, seven rigs drilling in the field and plans going to nine later this year."We have such a good, deep inventory [of potential drilling sites] in the Barnett that we feel like we can keep drilling at the rate we're drilling for decades."That should maintain or even grow the company's gross production of 850 million to 900 million cubic feet a day, Williams said, with lifetime production from each Barnett well ranging from about 2 billion to 8 billion cubic feet of gas.Williams expects XTO to continue reducing its "environmental footprint" by putting as many as 30 wells on a single padsite. One XTO site in northwest Tarrant County has 12 wells on it, and another in the same area has seven wells with a potential for 30, the company said. Williams said XTO's Haynesville Shale production has soared more than 50 percent in the past year and now is about 340 million cubic feet of gas per day.Challenges to growthNevertheless, XTO has had some problems this year.The company scrapped plans to drill in the Southlake area in Northeast Tarrant County when proposed padsites (one in Southlake and one in Keller) were rejected by those cities after opposition from residents. XTO leases there are starting to expire."It's very disappointing to us," Williams said. "We were looking forward to a good win-win development with the Southlake community that would develop a large acreage position with a minimal footprint and allow 5,200 mineral owners to realize the benefits of their ownership."I'm not writing off Southlake altogether," he said. "When that leasehold expires, it will still be available and open. ... We'll never say never."In northern Pennsylvania, state regulators are investigating instances of methane, the chief component of natural gas, contaminating seven residential water wells in the vicinity of XTO drilling. XTO voluntarily stopped operations and supplied bottled water to residents, but the methane source has not been determined. XTO said methane was in some water samples the company collected within 4,000 feet of its well sites before it began drilling.Some analysts have questioned Exxon's purchase of XTO, citing prolonged weakness in natural gas prices. But Exxon thinks gas is a good long-term bet because it increasingly will be used to generate electricity.Since the merger, Exxon has been buying gas properties relatively cheaply. As a result, XTO's resource base has jumped by 13 trillion cubic feet, to the equivalent of 58 trillion, Williams said.There are about 1,700 XTO and Exxon employees working in Fort Worth, a slight increase from the number of XTO employees in the city before the merger. Williams said he "had high expectations coming in" as XTO's president, having "heard good things" about the company."But those expectations were clearly exceeded," he said, as he found a " very productive" workforce with "a can-do attitude.""It's a fun place to work," he said. "They work hard but have a good sense of humor. ... I'm really, really enjoying the atmosphere."Jack Z. Smith, 817-390-7724Have more to add? News tip? Tell us
