XTO Energy Inc.XTO

Morningstar Rating

Stock Research and Analysis

by Eric Chenoweth, CFA

A disciplined strategy has helped XTO Energy assemble a portfolio of high-quality natural gas producing properties, and boost operating margins and returns on invested capital.

XTO's acquire-and-develop strategy is not unique. Rather, disciplined integration Read more

Bulls Say

A dramatic reduction in oilfield drilling activity should drive demand and costs down for drilling and services, which will reduce XTO's costs.

XTO's large hedge position in 2009 and 2010 should help it achieve higher realized prices than many of its peers' should oil and natural gas prices remain low.

XTO's large positions in multiple producing regions across the country position it well for future profitable growth through acquisitions.

Historically, XTO has produced ROICs and operating margins above the peer average. Read more

Bears Say

XTO's aggressive growth through acquisitions strategy requires access to external sources of capital from time to time, which may not always come on as favorable terms as in recent years.

Recent actions taken by the government suggest that the U.S. E&P industry could be a target for new taxes and regulations, thus reducing profitability industrywide.

Costly exploratory failures, mechanical problems, and environmental disasters are constant concerns for exploration and production companies.

Rising costs for drilling rigs and oil and gas services could eat into XTO's profit margins when supply is tight and demand is strong. Read more

Strategy

XTO acquires and develops onshore oil and gas properties in North America. The firm focuses on purchasing properties with established production records and long expected-reserve lives. XTO hopes to Read more

Management

Bob Simpson recently stepped down as CEO and limited his role at XTO to the chairman position. Keith Hutton became XTO's new CEO, and Vaughn Vennerberg became president. Simpson cofounded XTO in 1986 with longtime business partner and former president Read more

Profile

XTO Energy, based in Fort Worth, Texas, engages in the exploration and production of natural gas and oil. Its gathering and processing operation accounts for less than 5% Read more

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