Exxon sells second-largest U.S. natural-gas area

By | Friday, October 3, 2008

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From combined dispatches

Exxon Mobil Corp., the world's biggest energy company, abandoned the second-largest U.S. natural-gas region after a supply glut slashed the value of the furnace fuel by almost half in the past three months.

Exxon sold its stakes in gas fields and a pipeline in Texas' Barnett Shale yesterday to Harding Energy Partners LLC, the closely held Dallas-based company that formed a joint venture with Exxon in 2006, Harding spokeswoman Linda Pavlik said Thursday.

Harding, in turn, sold the gas fields and 80-mile pipeline to Oklahoma City-based Chesapeake Energy Corp., the second-largest U.S. independent gas producer, Miss Pavlik said in a telephone interview. Patrick McGinn, a spokesman for Irving, Texas-based Exxon, confirmed the sale.

Despite supply interruptions caused by Hurricane Gustav, plenty of natural gas should be available for heating this winter and prices are likely to stay about the same as last winter, natural gas producers said.

Nearly half of the natural gas production in the Gulf of Mexico remains shut down because of two recent hurricanes. But the industry said that gas inventories at the start of the winter heating season — traditionally the beginning of November — are expected to be well above the five-year average.

Producers are expected to pump about 8 percent more gas than last winter, with more wells operating, the Natural Gas Supply Association said Thursday in its winter outlook report.

Mr. McGinn and Miss Pavlik declined to disclose the terms of the transaction, which included the first permit ever awarded to drill for gas within Dallas city limits. The Exxon-Harding venture, known as DDJET Limited LLP, never drilled the well, obtained in 2007 for a site near Dallas Baptist University, Miss Pavlik said.

Exxon had $39 billion in cash and near-cash equivalents at the end of the second quarter, thanks to record oil prices earlier this year.

Investors and lawmakers have criticized the company for spending more on stock buybacks than energy exploration and refinery expansions. Output from Exxon's wells fell to the equivalent of 3.8 million barrels of crude a day in the April-to-June period, the lowest since the third quarter of 2005.

Exxon Mobil stock fell 17 percent this year, on course for the largest annual drop since 1981, when the shares plunged 22 percent. The company's stock has posted annual declines five times in the past 27 years. It dropped $1.08, or 1.4 percent, to $77.50 Thursday in composite trading on the New York Stock Exchange.

The Barnett Shale may hold 39 trillion cubic feet of recoverable gas, or enough to supply the entire U.S. for almost two years, according to a 2005 assessment conducted for the Energy Department. The region trails only the Rocky Mountains in terms of gas production, according to the U.S. Geological Survey.

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