Shares of Fort Worth-based XTO Energy Inc. fell as much as 11 percent Tuesday despite a 33 percent rise in second-quarter earnings and $2.1 billion in acquisitions aimed at doubling its size in three years.
Investors weren't impressed with XTO's flurry of upbeat news even after it beat Wall Street earnings expectations, increased its production targets for oil and gas, and said it would spend $4.6 billion on exploration and production next year.
Shares closed down $4.87, or 8.4 percent, at $53.11, having dipped as low as $51.25 in trading Tuesday.
The shares have slid 23.3 percent since July 1; analysts pointed to a continuation of sharply lower natural gas prices for the sell-off.
XTO chairman and chief executive Bob R. Simpson said Tuesday his company will double in size by 2011, making it the nation's top natural gas producer, thanks mostly to a $10.6 billion buying spree this year that included Dallas' Hunt Petroleum Corp.
"It's exciting times – it's much like what the people in West Texas in the '40s and '50s felt like," said Mr. Simpson in a conference call with analysts, referring to the oil boom that built Texas' energy lore. "I've got 10 million shares of this company that are looking forward to it doubling."
Some analysts aren't quite as giddy as Mr. Simpson.
The new acquisitions "are adding very little in the way of incremental production growth in 2009," said Morgan Keegan analyst Chris Pikul in a note to investors. "Nevertheless, we think XTO has strengthened its portfolio for long-term growth, and the current weakness in the shares presents a buying opportunity."
After markets closed Tuesday, XTO said it would issue 26 million shares to help finance its acquisitions; the new shares will dilute current shares, which could also pressure the company's price.
Strong energy prices fueled XTO's second quarter with earnings of $575 million, or $1.11 per diluted share. Excluding a one-time gain, the net income of $1.07 a share topped analyst predictions of $1.05 a share by Thomson First Call.
Sales rose 46 percent in the quarter to $1.94 billion.
XTO said Tuesday that it bought $800 million of acreage in the Barnett Shale from an undisclosed seller, adding to its core holdings in the gas and oil field that spans four North Texas counties.
Its other buys were scattered among other shale deposits nationwide.
Mr. Simpson blamed the drop in natural gas prices on "hype artists" who are touting gas reserves in new shale fields such as Haynesville in Louisiana, which is being talked up as larger than the Barnett Shale.
XTO's recent buys include more than 100,000 acres in the Haynesville field through its Hunt Petroleum deal.
"It's a little irritating from our viewpoint," Mr. Simpson said of the big numbers attached to other fields that could be depressing gas prices. "We're real fundamental guys, and we're not looking to stampede people."
A fundamental natural gas shortage remains in place and could be fanned by the hurricane season, Mr. Simpson said. . Tuesday, gas platforms in the Gulf of Mexico were shut down as Hurricane Dolly neared the Texas and Mexico coasts.
Natural gas for August delivery fell 44.3 cents, or 4.2 percent, to settle at $10.067 per 1,000 cubic feet, its lowest in more than three months.
