Obama’s Oil Loss is Exxon’s (XOM) Gain

Wyatt Investment Research

President Obama may have rejected Canadian oil. But the world’s largest oil company has gladly accepted our neighbors to the north.

Exxon (XOM) has agreed to purchase Celtic Exploration (CLT.TO) , a Canadian oil-and-gas producer, for $2.6 billion. Celtic currently produces 72 million cubic feet per day of natural gas and 4,000 barrels a day of crude oil.

By purchasing Celtic, Exxon acquires access to roughly 650,000 acres worth of fertile shale oil and gas land.

You may recall that President Obama rejected TransCanada’s Keystone XL pipeline, a proposed pipeline that would stretch from Canada’s oil sands all the way to refineries in Texas. Mitt Romney certainly remembers. He took the president to task on several occasions during last night’s debate for nixing the Keystone deal.

Here’s what Romney said:

“What we don’t need is to have the president keeping us from taking advantage of oil, coal and gas. This has not been Mr. Oil, or Mr. Gas, or Mr. Coal.”

That – like almost everything uttered last night by both candidates – is only partially true. But that’s beside the point.

The point is that Exxon is dipping into an oil and natural gas market that the President of the United States publicly rejected recently. Will it pay off? The numbers suggest it would be foolish to ignore Canada as an oil supplier.

Canada expects to more than double its production of domestic crude oil to 6.2 million barrels per day by 2030. According to Greg Stringham, vice president of the Canadian Association of Petroleum Producers (CAPP), such growth would place Canada among the “top three or four oil producers in the world.”

Through 2010, Canada was already sixth in the world in oil production.

Now Exxon stands to profit a bit more from Canada’s expected oil boom. News of the company’s Celtic purchase have boosted shares roughly 1% today. Celtic’s stock, which is listed on the Toronto Stock Exchange, has exploded 45% as a result of the Exxon buyout.

Exxon is reportedly offering Celtic $24.50 per share for its outstanding shares, plus half a share of a new company – amounting to a 35% premium for Celtic’s Tuesday closing price of $18.12. The stock has already risen to $26.29 per share.

Clearly, investors recognize the importance of Canadian oil. And now Exxon has a leg up on its competitors in one of the most fertile oil-producing countries in the world.  

Keep an eye out for other publicly traded oil companies – big or small – that follow Exxon’s lead. Our current president may not want Canada’s oil. But it’s the new frontier in the fossil fuels industry – and a potentially profitable one at that.



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