XTO Energy (XTO) Picks a Bad Day to Announce Earnings

XTO Energy (XTO) put out a bevy of good news today but since crude oil is down a few bucks today - the supercomputers and their trader friends running this market will have nothing of it. Down 8-9%.

Let's review all the good... err... bad news

Earnings up 33%

• XTO Energy Inc (XTO) on Tuesday said second-quarter earnings rose 33 percent on higher production and natural gas prices. Net income in the quarter rose to $575 million, or $1.11 a share, from $432 million, or 91 cents a share, last year. Excluding one-time items, the company said it earned $1.07 a share in the quarter. Analysts, on average, had expected the company to earn $1.04 a share, according to Reuters Estimates.
• Natural gas and oil production in the quarter rose 29 percent from last year to 2.20 billion cubic feet equivalent per day.

Production Growth in 2009 targeting 22%

• XTO Energy Inc. (NYSE: XTO - News) announced today that the Company is increasing its 2009 production growth target to 22% based on projected development activities and acquisitions already announced in 2008.
• In order to achieve this production growth, the 2009 development budget is estimated to be $4.6 billion. The Company plans to utilize about 120 operated drilling rigs.
  
• Another $700 million will be allocated for pipeline infrastructure, compression and processing facilities.
• Executive Bob Simpson said XTO could double in size over a four-year period.

Even more acquisitions for this asset hungry company

• XTO Energy Inc. (NYSE: XTO - News) announced today that it has entered into definitive agreements with multiple parties to purchase producing properties located in its Eastern and San Juan Regions and acreage positions in the Marcellus, Fayetteville, Barnett, and Haynesville shales, for a total of about $1.3 billion, of which $1 billion closed during the second quarter.
• From the producing properties, XTO Energy's internal engineers estimate proved reserves to be 185 billion cubic feet of natural gas equivalent (Bcfe) of which approximately 60% are proved developed. Starting July 1, these acquisitions add 20 million cubic feet of natural gas equivalent per day (MMcfe/d) to the Company's production base.
• Bob R. Simpson, Chairman and Chief Executive Officer. "With the transactions announced today, including our Barnett Shale acquisition, XTO has now committed to a total of $10.6 billion in assets this year which complement and expand our operated positions across the nation. Through diligence, discipline and hundreds of transactions, we are acquiring the equivalent of a very high-grade unique company. This handcrafted company contributes a portfolio of properties in our legacy basins and adds expansive undeveloped acreage in all the premier emerging shale plays. As a result, the new XTO is a better franchise with more growth firepower for the future."
• Acquisitions in 2008 represent over 2.3 Tcfe of proven reserves today and another 6 to 8 Tcfe in upsides

But Mr. Simpson, natural gas is down a % or two today, who cares about the long term - it's time to trash your stock. After all this is just "one big commodity trade" - forget the fundamentals. Your chart is now broken and it's our job, as the hedge fund community, to short you as if you are a subprime lender - after all we have to make our number this quarter. You deserve at least a $50 price for your insurgence - doubling your size in 4 years? When natural gas is down the past 3 weeks? What sort of hair brained idea is that. Further, at 12x forward earnings you are an overbloated pig and if natural gas falls another 10% you deserve a 6 multiple. It's only a trade Bob - you're just a 3 or 4 letter symbol we trade in and out of on a daily basis to make our quarter - no hard feelings, I hope. One day (heck maybe tomorrow) we'll reverse course and take you back up. You're in our back pocket now Bob - now we have to go find a good technology stock to go long, since they are safe as they don't have natural gas exposure - so we can't talk any further. Have a nice day.

Long XTO Energy in fund; no personal position