Like its recent foray into Arctic drilling, Exxon Mobil’s (NYSE:XOM) forward-thinking purchase of XTO in 2009 made it the king of the natural gas sandbox. At the time, XTO was the second-largest gas producer, owning a substantial portfolio of fields and holding a diverse knowledge in advanced extraction techniques. CEO Rex Tillerson said of the $31 billion deal: “This is not a near-term decision; this is about the next 10, 20, 30 years. We think there will be significant demand for natural gas in the future.”
“Long term” seems to be in Exxon’s blood. The firm predicts overall energy demand will rise 30% by 2040 and natural gas will replace coal as the second-most popular fuel by 2025, so Exxon has increased its focus on developing natural gas over the last few years. Since that time, the energy giant has become the largest producer of natural gas in the U.S. and receives about 50% of its production from the fuel. Likewise, more than 50% of BOE reserves are in natural gas.
Exxon and Tillerson have made a calculated bet on the fuel’s future, and so far investors have been rewarded with 77% returns since he became CEO in 2006. The fracking boom undoubtedly will continue to boost Exxon’s performance.