April 29, 2002; XTO Energy A Leader In U.S. Natural Gas Reserves

XTO Energy has grown impressively in the ten years since the company was formed as Cross Timbers Oil Company.  Management points out that XTO now ranks fourth among independents in ownership of U.S. natural gas reserves behind Anadarko, Burlington Resources and Devon Energy. 

Management tells its story well and may even appear over confident from time to time.  Investors had good reason to be concerned when debt reached $0.56 per mcfe in 1998.  Fortunately since then the properties bought with that debt have proven to be valuable.  Debt is now down to $0.32 per mcfe by management’s calculation, or to 0.21 by our calculation of the ratio of debt to present value.

A recent transaction covered in a press release on April 11 attests to creative deal making.  In a three-way arrangement, XTO and Marathon exchanged properties and CMS Energy received cash.  XTO increased its concentration in natural gas in East Texas, now the dominant source of the company’s unexploited potential.