Filed by Exxon
Mobil Corporation
Pursuant to Rule
425 of the Securities Act of 1933
and deemed filed
pursuant to Rule 14a-12
of the Securities
Exchange Act of 1934
Subject Company:
XTO Energy Inc.
(Commission File
No.: 1-10662)
ExxonMobil-XTO
Agreement
ExxonMobil
Background Information
Agreement
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The agreement
brings together two highly complementary organizations whose combined
strengths will deliver strong shareholder value and open new opportunities
for the production of clean-burning natural
gas.
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Under the terms of the agreement,
approved by the boards of directors of both companies,
ExxonMobil has agreed to issue
0.7098
common shares for each common
share of
XTO
. This represents a
25
percent premium to
XTO
s
tock
holders. Th
e transaction value includes $10
billion of existing
XTO
debt and is based on the closing
share prices of ExxonMobil and
XTO
on December 11,
2009.
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We have no
current
plans to dispose of any
assets.
However, we have an ongoing asset
management process by wh
ich we continually evaluate
all
assets
.
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Completion of
the transaction is expected in the second quarter of
2010.
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The transaction is structured as a
tax-free exchange of shares.
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We expect the agreement to be
a
ccretive to
production growth and cash flow
.
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Depending on the market price for gas, it is not likely
to be accretive to near-term earnings per share and may be
dilutive.
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Legally, the agreement is
structured as a merger.
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Natural
Gas
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This
agreement is good news for the United States as it will help produce more
of America’s own clean-burning natural gas, which brings with it
innovation, technology, investment and
jobs.
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ExxonMobil’s
Energy Outlook indicates that gas will grow more rapidly than any other
major energy source given its availability and relatively low carbon
profile.
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We believe
gas is the fuel of choice for power generation where it will increasingly
replace coal. Natural gas produces fewer greenhouse gas emissions than
other electrical-generation fuels, such as
coal.
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Technological
advances have allowed industry to define 80 to 100 years of natural gas
resource in the U.S. at current production
rates.
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Evaluating
Opportunities
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The agreement
has resulted from an ongoing, disciplined evaluation of timely investment
opportunities to create value for shareholders. It is consistent with
ExxonMobil’s business model, which is focused on sustainable, long-term
value creation.
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ExxonMobil’s
primary focus is on maximizing value for our shareholders. We
are interested in the best oil and gas
opportunities.
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All of our
projects are evaluated on their own merits. This deal does not preclude
any other opportunities.
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We are
constantly monitoring potential opportunities that can add value for
shareholders.
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We believe we
are well positioned should further good opportunities present
themselves.
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Credit
Rating / Debt
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While ratings
decisions are ultimately made by rating agencies, our approach to this
transaction is consistent with financial principles underlying
ExxonMobil’s long-standing AAA rating and superior access to financial
markets.
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As an
all-share transaction, there will be no new acquisition debt or use of
cash associated with the agreement. ExxonMobil’s consolidated balance
sheet will reflect the debt currently on XTO’s balance sheet but it will
not make an appreciable change in ExxonMobil’s all-in leverage ratio,
which is a key metric for the rating
agencies.
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Regarding
potential debt repayment, we will do a complete analysis of our options
using our long-standing principles of focusing on shareholder value and
maintaining a conservative capital
structure.
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Share Repurchase
Program
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Investing wisely in
attractive
energy
opportunities
is
our first priority
.
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When we have paid our
expenses
,
paid taxes to
governments and invested in all of the projects
that meet our investment
criteria,
we pay a
dividend and w
here
appropriate
,
return
cash
to our shareholders through
buybacks so that they can redeploy it in the
economy.
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We are
not going to speculate on future
share repurchase plans
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Under SEC rules, we
are
precluded from repurchasing
s
hares during
XTO
’
s proxy solicitation
period.
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Accounting
and Debt
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We will
account for this transaction as a purchase, consistent with US GAAP
rules.
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US GAAP
requires the asset and liabilities acquired to be recognized at fair
value. The difference between the fair value of the assets and
liabilities, associated deferred taxes and the purchase price is
recognized on the books as
Goodwill.
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Pro-forma
financials are not required. In the first period after closing, combined
financial results will be provided.
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We expect
that the principal and interest obligations to the holders of XTO bonds
will continue to be honored after the transaction
closes.
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Hedging
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The XTO
business model used hedging to ensure more stable, predictable cash
flow. This is a reasonable and common practice for smaller
companies. Given ExxonMobil’s financial strength and diverse portfolio,
this will not be necessary.
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XTO
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XTO is a
leading U.S. unconventional natural gas producer and has large,
high-quality resources, strong technical capabilities, operating expertise
and highly skilled employees.
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It was
founded in 1986, is headquartered in Fort Worth Texas and has
approximately 3,000 employees, all in the United States. About one-third
are in Fort Worth and the remainder are in the field or in district
offices.
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XTO
Production & Resource Base
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XTO’s
resource base is the equivalent of 45 trillion cubic feet of gas. Proved
reserves are the equivalent of 13.9 trillion cubic feet (2.3 billion oil
equivalent barrels). Gas represents over 80 percent of XTO’s production
and reserves.
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XTO is a top
gas producer in the United States and currently produces about 2.4 billion
cubic feet per day (Q3-09 total). That represents approximately four
percent (4.2%) of current daily U.S. natural gas production (57 BCFD
Q3-09).
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XTO has a
proven ability to profitably grow production and reserves. XTO has
averaged more than 20 percent growth in annual production since
1993.
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XTO’s
portfolio is largely unconventional and includes tight gas, shale gas,
coal bed methane and shale oil. It is geographically focused in all the
major U.S. unconventional plays.
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XTO has a
shale gas position in the Barnett shale in North Texas, Haynesville in
East Texas and western Louisiana, Woodford and Fayetteville in Oklahoma
and Arkansas respectively, and Marcellus shale in Pennsylvania and West
Virginia. XTO has a tight gas position in the Freestone Trend in East
Texas and in the Uinta Basin in the Rockies. Also in the
Rockies, they hold tight gas and coal bed methane acreage in the San Juan-
Raton Basin.
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XTO produces
shale oil from the Bakken Shale in the Williston Basin in Montana and
North Dakota.
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ExxonMobil
Resource Base
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ExxonMobil’s
resource base of the equivalent of 72 billion barrels of oil is
geographically diverse. Proved reserves are 22.8 billion oil equivalent
barrels. Unconventional gas currently makes up about seven
percent.
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ExxonMobil’s
current U.S. natural gas production is about 1.3 billion cubic feet of gas
per day (Q3-09) or about two
perce
nt
(2.2%)
of daily U.S. natural gas
production
(57 BC
F
D Q3-09).
Worldwide, ExxonMobil produces
about 8.7 billion cubic feet per
day.
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Combined ExxonMobil and
XTO
Resources
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XTO’s assets
will complement ExxonMobil’s U.S. unconventional holdings in Piceance and
Marcellus, as well as the Horn River Basin in Canada and acreage in
Germany, Poland, Hungary and
Argentina.
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When combined
with XTO’s production, ExxonMobil will produce about six
percent
(3.7
BCFD
or 6.4%)
of
current
U.S.
daily
natural gas production
(
57
BCFD
)
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When
combined, ExxonMobil’s total natural gas volumes are expected to represent
approximately 45 percent of ExxonMobil’s total production, slightly higher
than today’s mix.
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When
combined, ExxonMobil’s unconventional resource portfolio will contain
nearly 8 million acres worldwide. This does not include our very large
heavy oil assets.
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XTO
Employees
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XTO has
expertise in tight gas, shale gas, shale oil and coal bed
methane.
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XTO’s
employees are very important to the success of this agreement. They bring
the ability to enhance our global operations through the vast experience
they have gained in domestic
operations.
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While we of
course will look for efficiencies, that is not what is driving this
agreement. XTO’s employees are recognized for their technical excellence
and will be critical in the success of this global unconventional resource
organization. Our intention is to retain most of XTO’s
employees.
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Combined
ExxonMobil and XTO Capabilities
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Following
closure of the transaction, our plan is to establish a new ExxonMobil
organization to manage global development and production of unconventional
resources. It will be based in Fort Worth in XTO’s current
offices.
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The new
organization will build on the strengths of both companies. It will be a
global functional company designed to manage our quality unconventional
portfolio.
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The new
organization should enable the rapid development and deployment of
technologies and operating practices across our global portfolio to
maximize resource value.
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XTO’s skills
and capabilities when combined with ExxonMobil’s advanced R&D and
operational capabilities, global scale and financial capacity, should
enable development of additional supplies of unconventional oil and gas
resources, benefiting consumers both here in the United States and around
the world.
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Safety,
Health and Environmental Issues
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ExxonMobil is
committed to safety, environmental protection and efficiency and will
employ those corporate values in the development of these
resources.
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About
ExxonMobil
E
xxonMobil,
the largest publicly traded
international oil and gas company, uses technology and innovation to help meet
the world
’
s growing energy needs.
ExxonMobil
holds an industry-leading inventory of
resources, is the largest refiner and marketer of petr
oleum products, and its chemical company
is one of the largest in the world. For more information, visit
www.exxonmobil.com
.
About
XTO
XTO
is a domestic oil and natural gas
producer engaged in the acquisition, exploitation and development of quality,
lon
g-lived oil and natural
gas properties in the
United States
. Its properties are
concentrated in
Texas
,
New Mexico
,
North Dakota
,
P
ennsylvania
,
West Virginia
,
Arkansas
,
Oklahoma
,
Kansas
,
Wyoming
,
Colorado
,
Utah
,
Louisiana
and
Montana
. For more information,
visit
www.xtoenergy.com
.
Important
Information For Investors And Stockholders
This communication
does not constitute an offer to sell or the solicitation of an offer to buy any
securities or a solicitation of any vote or approval. ExxonMobil will
file with the Securities and Exchange Commission (“SEC”) a registration
statement on Form S-4 that will include a proxy statement of XTO that also
constitutes a prospectus of ExxonMobil. ExxonMobil and XTO also plan
to file other documents with the SEC regarding the proposed
agreement. A definitive proxy statement/prospectus will be mailed to
stockholders of XTO. INVESTORS AND SECURITY HOLDERS OF XTO ARE URGED TO READ THE
PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS THAT WILL BE FILED WITH THE SEC
CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED
TRANSACTION. Investors and stockholders will be able to obtain free
copies of the proxy statement/prospectus and other documents containing
important information about ExxonMobil and XTO, once such documents are filed
with the SEC, through the website maintained by the SEC at
http://www.sec.gov
.
Copies of the documents filed with the SEC by ExxonMobil will be available free
of charge on ExxonMobil’s internet website at
www.exxonmobil.com
under the tab "investors" and then under the tab "SEC Filings" or by contacting
ExxonMobil’s Investor Relations Department at 972-444-1156. Copies of the
documents filed with the SEC by XTO will be available free of charge on XTO’s
internet website at www.xtoenergy.com
under the tab "Investor Relations" and
then under the tab "SEC Filings" o
r by contacting XTO’s Investor
Relations Department at 817-870-2800.
ExxonMobil,
XTO, their respective
directors and certain of their executive officers may be deemed to be
participants in the solicitation of proxies from the stockholders of XTO in
connection with the proposed transaction. Information about the directors and
executive officers of XTO is set forth in its proxy statement for its 2009
annual meeting of stockholders, which was filed with the SEC on April 17,
2009. Information about the directors and executive officers of
ExxonMobil is set forth in its proxy statement for its 2009 annual meeting of
stockholders, which was filed with the SEC on April 13, 2009. Other
information regarding the participants in the proxy solicitation and a
description of their direct and indirect interests, by security holdings or
otherwise, will be contained in the proxy statement/prospectus and other
relevant materials to be filed with the SEC when they become
available.
Cautionary
Statement Regarding Forward-Looking Statements
Statements in this
document relating to future plans, projections, events or conditions are
forward-looking statements. Actual results could differ materially as a
result of a variety of risks and uncertainties, including: the timing to
consummate the proposed agreement; the risk that a condition to closing of the
proposed agreement may not be satisfied; the risk that a regulatory approval
that may be required for the proposed agreement is not obtained or is obtained
subject to conditions that are not anticipated; ExxonMobil’s ability to achieve
the synergies and value creation contemplated by the proposed agreement;
ExxonMobil’s ability to promptly and effectively integrate XTO’s businesses; and
the diversion of management time on agreement-related issues.
Other factors that could materially
affect ExxonMobil’s and XTO’s actual results
, including project plans,
costs, timing, and capacities; capital and exploration expenditures; and share
purchase levels, include: changes in long-term oil or gas prices or
other market or economic conditions affecting the oil and gas industry;
completion of repair projects as planned; unforeseen technical difficulties;
political events or disturbances; reservoir performance; the outcome of
commercial negotiations; wars and acts of terrorism or sabotage; changes in
technical or operating conditions; and other factors discussed under the heading
“Factors Affecting Future Results” available through the "investors" section on
ExxonMobil’s website, in
Item 1A of
ExxonMobil's 2008 Form 10-K and in Item 1A of XTO's 2008 Form
10-K. No assurances can be given that any of the events anticipated
by the forward-looking statements will transpire or occur, or if any of them do
so, what impact they will have on the results of operations or financial
condition of ExxonMobil or XTO. Neither ExxonMobil nor XTO assumes
any duty to update these statements as of any future date. References
to quantities of oil or natural gas may include amounts that ExxonMobil or XTO
believe will ultimately be produced, but that are not yet classified as “proved
reserves” under SEC definitions.