XTO Energy to Buy Hunt Petroleum for $4.2 Billion

XTO Energy said Tuesday it is acquiring privately held Hunt Petroleum Corp. for $4.19 billion in cash and stock in a deal made more attractive by high oil and gas prices.

XTO Energy said the deal includes $2.6 billion in cash and 23.5 million shares of XTO stock. The stock portion of the deal is valued at about $1.6 billion, or $67.50 per XTO share.

The company said it would pay the $2.6 billion cash portion from its cash flow and borrowing, although it didn't provide a breakdown.

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[XTO  Loading...      ()   ] shares slipped 63 cents to $67.09 in afternoon trading Tuesday after rising to a 52-week high of $70.63 earlier in the session.

The sale would mean the end to the independent Hunt company, which was started by famed Texas wildcatter H.L. Hunt, who was considered one of the wealthiest men in America before his death in 1974. His heirs have fought over billions of dollars in trust fund assets.

In November, one of Hunt's great-grandsons sued his father and several other family members, claiming they conspired to exclude him from part of his inheritance because he opposed a plan to sell Hunt Petroleum.

The lawyer for great-grandson Albert Hill III vowed to fight the sale, calling the price too low.

"Why would anyone dump the company at this price in this market? Unbelievable," said Hill's lawyer, William Brewer. He said he could ask the judge handling the trust lawsuit to block the sale.

XTO Chairman and Chief Executive Bob R. Simpson said he believes the Hunt family wanted to sell the company before a new administration in 2009 could raise taxes on gains.

Simpson said that at expected oil and gas prices, the Hunt properties' proved reserves of about 1 trillion cubic feet of natural gas equivalent should generate more than $1.2 billion in cash flow next year.

Fort Worth-based XTO raised its production growth target to up to 30 percent for 2008 and 20 percent for 2009 due to the acquisition of Hunt and properties from Headington Oil Co. To hit those targets, the company figures to spend $4 billion to $4.5 billion on development that would use 110 to 120 drilling rigs.

Executives admitted rigs could be in short supply -- $130 per barrel oil has increased drilling activity -- but said they could bring in rigs from other areas.

The Hunt acquisition could add 197 million cubic feet of natural gas, 8,500 barrels of oil and 2,300 barrels of natural gas liquids to XTO's daily production, the company said.

About 70 percent of the properties are in east Texas, central and northern Louisiana. Most of the rest are along the Gulf Coast and in the Gulf of Mexico, with a small percentage in the North Sea.

XTO officials said the Hunt properties overlap with XTO's efforts to extract gas and oil from sand formations and carbonates. They said the Hunt assets would let XTO increase production in the east Texas and Louisiana region by 15 percent per year.

The acquisition is expected to close around Sept. 3, subject to antitrust clearance.