NEW YORK (Dow Jones)--Exxon Mobil Corp.'s (XOM) decision to buy XTO Energy Inc. (XTO) shows it can do something that the government cannot: Help bring energy independence to the U.S.
The form of the energy in the case of XTO is natural gas, something that is abundant across America. Matt McCall, president of New Jersey-based adviser Penn Financial, succinctly sums it up: "The U.S. is the Saudi Arabia of natural gas," meaning we have vast amounts of the energy stored in the ground.
As well as being plentiful, it is also a relatively clean fossil fuel. On top of that, there aren't any unstable foreign governments for drillers to worry about.
Until quite recently, the problem with U.S. deposits was extracting the gas from shale in an economic manner. Igenious companies such as XTO have overcome that hurdle in the past few years. The question now is how to get these pioneering firms to the next level.
For all practical purposes, the government cannot help. It has an embedded problem with assisting the development of such reserves: The increasingly cash-strapped but voting public doesn't view subsidizing oil and gas companies favorably. That is where major firms like Exxon come in, assisting operators such as XTO by purchasing them.
"Exxon brings organizational and financial clout to what in some cases looks like a startup industry," says Adam Sieminski, chief energy economist at Deutsche Bank in Washington, D.C.
That will be good for XTO and the whole shale-gas industry. Organizational and operational knowledge tends to spread within an industry regardless of which company starts the ball rolling. In short, that means the costs of extraction will dwindle.
Investors should care because other major oil companies will almost certainly jump on the Exxon bandwagon and acquire natural-gas companies similar to XTO.
Penn's McCall points to Chesapeake Energy Corp. (CHK), Anadarko Petroleum Corp. (APC) and Continental Resources Inc. (CLR) as potential takeout targets.
The end result will hopefully be more profits and big steps toward energy independence