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ExxonMobil doubles down on Bakken

After nearly three years of sitting on the sidelines, ExxonMobil has re-entered the US acquisition market with a $1.6-billion purchase of Bakken assets

Through its wholly-owned XTO subsidiary, ExxonMobil will buy 100% of Denbury Resources’s Bakken holdings in North Dakota and Montana. The properties consist of approximately 196,000 net acres with expected production in the second half of 2012 of more than 15,000 barrels of oil equivalent (boe) per day.

“This agreement provides a strategic addition to ExxonMobil’s North American unconventional resource base”, Andrew Swiger, the company’s senior vice president, said in a statement.

The agreement increases ExxonMobil’s holdings in the Bakken region by about 50% to nearly 600,000 acres, giving the company a significant presence in one of the major US growth areas for onshore oil production.

According to North Dakota regulators, Bakken production hit 610,000 barrels per day (b/d) in the first half of 2012, or 10% of US oil production. The tight oil formation is on track to approach1 million million b/d sometime around the end of this year, according to Energy Information Administration estimates. North Dakota’s oil production is up about 70% year-over-year and in early 2012 it surpassed Alaska and California to become the second-largest oil producing state after Texas.

In exchange for its Bakken shale assets, Denbury will receive $1.6 billion in cash and acquire ExxonMobil’s interests in the Hartzog Draw field in Wyoming and Webster field in Texas, which currently produce about 3,600 boe/d of natural gas and liquids.

The Bakken shale acreage will be operated by XTO, which ExxonMobil bought for $41 billion in 2009. Since then, it has only made one other acquisition, purchasing properties in Pennsylvania’s Marcellus in June of last year.

The US' largest producer is notoriously tight with its cash, and has spent much of the past three years repurchasing XTO’s debt on more attractive terms.

Whether the latest buys are a sign it is willing to start opening the purse strings remains to be seen.

The deal increases ExxonMobil’s US oil production production by about 3%. It also ads much-needed running room in what is shaping up to be the largest onshore field in the US after the Eagle Ford.

More important, it adds low-cost reserves the company needs to replace production. With the deal, ExxonMobil is one of the largest leaseholders in the Bakken, alongside Marathon, Hess and EOG Resources.

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