Is XTO Energy Inc. buying U.S. natural gas assets too aggressively? Ben Dell, E&P analyst at Bernstein Research, doesn’t think so. “As sentiment in the natural gas market shifts from bullish towards cautious, (XTO’s) earnings release (yesterday) led to a sell-off in the stock, perhaps led by investors concerned that XTO is buying assets at a peak. “While we have often advocated caution with regard to commodity prices, the long-term outlook for both natural gas and XTO remain good.” XTO has announced more than $10 billion of U.S. gas assets so far this year, and expects the size of the company to double in the next couple in terms of production and reserves. Dell says, “In terms of natural gas, we believe gas will increasingly become the fuel of choice for power generation as the costs of carbon rise. Even if prices recede as inventories build this summer, prolonged periods of gas prices below the marginal cost—approximately $7.75 per Mcf today—seem very unlikely to us. And XTO will be present to capture any upside, as the company proceeds with acquisitions in a disciplined and returns-focused manner.” He concludes, “Although investors appear increasingly concerned about the company's acquisition strategy, we believe that XTO's acquisitions this year will be successful for three reasons. First, the reasonable cost of the acquisitions combined with the company's anticipated growth mean that returns from these acquisitions will be good. “Second, concerns about reckless behavior are inappropriate since this wave of deal-making is motivated by tax concerns before a new administration comes in, and is unlikely to be repeated. “Finally, the deals do not present a threat to XTO's viability since it remains well capitalized and hedged.” He adds that, of course, oil and gas prices are uncertain. “However, in such an environment, investors would most likely want to position themselves defensively, in companies with seasoned and professional management teams that have the experience to weather different environments.” For example, XTO. The sell-down in XTO shares upon its earnings release this week “seems overdone,” he says. –Nissa Darbonne, Executive Editor, Oil and Gas Investor, A&D Watch,;