Exxon Prepares for the Future: Best in Class

IRVING, Texas (TheStreet) -- Exxon's(XOM) acquisition of XTO Energy(XTO) is a stamp of approval on an investing idea that has paid off big in 2009. Exxon Chief Executive Officer Rex Tillerson has placed a bet that natural gas is going to be huge.

The $29 billion deal, announced Dec. 14, valued XTO at a 25% premium over the stock-market price at the time, suggesting Exxon sees deep value. Exxon's diversification from traditional oil operations is a clear signal that even the biggest and most powerful oil company in the world is feeling the pinch. With stifling politics polluting most major oil-producing countries and drilling becoming more expensive as deep-water rigs are increasingly necessary, alternate fuels that can offer fewer headaches are attractive.

While major oil deposits lie in countries such as Venezuela, Sudan, Saudi Arabia and Iran, which makes accessing oil difficult to nearly impossible, natural gas is available in abundance in the U.S. Even though some deposits may be locked in shale previously thought to be too costly to access, advancements in drilling, such as hydraulic fracturing, has made reserves more easy to extract and improved the viability of natural gas as a partial replacement for dirtier fossil fuels.

Several other natural-gas stocks, like Southwestern Energy(SWN) and CARBO Ceramics(CRR), got a shot in the arm from the Exxon-XTO deal as many see it as a validation of the natural-gas thesis. Such an abundant resource is going to become increasingly important, one way or another, as electricity generators shy away from dirty coal to more environmentally friendly alternatives like natural gas. Others, like oilman T. Boone Pickens, have advocated using natural gas in transportation applications.