On Monday, ExxonMobil (XOM) announced a $41 billion merger with XTO Energy (XOM), the Texas-based Fortune 500 energies company known for its stake in natural gas.  The blogosphere erupted into a frenetic conflagration of “what-ifs.” The Wall Street Journal compiled a list on Tuesday of some common points of view articulated by analysts and investment firm experts.  No surprise, their opinions ranged from the optimistic to the cautious.  Big oil field service companies, it is argued, could stand to benefit from investing by providing “development packages” that use innovation and more efficient technology to get the job done.  Steve Levine of Business Week says XOM has bought a “green headache” due to the debate surrounding the pollution allegedly speweed into the environment hydraulic fracturing.  On that note, rumors persisted throughout the week that XOM could renege on the deal if an anti-fracking measure is pushed through Congress that would make obtaining gas from shale cost-prohibitive or illegal.

The problem with determining who wins on this merger is that, in spite of the wide variety of opinions on the matter, no one here is spit-balling.  Even the best analysts contend that the future of this merger is uncertain, and its success will be determined in the long term.  Analyst Pavel Mochanov explained on FoxNews Business that the deal may not pay off for years, and for good reason.  Molchanov explains that the story only makes economic sense several years into the future, when returns on the investment in the form of rising natural gas prices and unconventional technology will begin to affect Exxon at large.  Until then, he cautions, the story may not result in short-term gains for XOM.  For many investors, the buy is too far ahead of the curve to ensure investment opportunities for the time being, while ExxonMobil may position itself for future innovation and gains.  However, these innovations will only work if the complicated drilling, meant to release the gases trapped within rock, remains within the realm of possibility.

Unfortunately, there are two perceived problems with the sale that call for a note of caution.  The first is the inability to retain the entrepreneurs that made XTO work.  As detailed in the will-they, won’t-they Wall Street Journal article, retention of the employees that make the machine work has historically not worked so well.  In 2005, ConocoPhillips (COP) moved into natural gas with the purchase of Burlington Resources for some $36 billion, a gamble similar, on its face, to that of XOM.  When the recession hit, the decrease in demand resulted in less than satisfactory prices, a condition that has hampered investors for the past couple of years.  Climate change legislation would have been the key to success for this cleaner-burning energy source.  The second issue is just that—legislation has kicked back against natural gas because of environmental opposition to shale drilling.  The result is a classic catch-22.

What seems to make sense to most investors is the relatively low price paid for the acquisition—a risk for sure, but likely a worthwhile one down to road.  Buying XTO allows access to their unconventional practices for XOM, saving years of time and money cultivating forward-looking employees.  The team required to manage and develop such resources are picked up immediately.  The purchase seems to make sense with respect to the ConocoPhillips merger because of the new hydraulic fracturing techniques that will provide easy, cost-effective access to reserves of oil in hard to reach places.  For the first time, these reserves are available and accessible: while the drilling was previously attempted by smaller companies, XOM will be the largest to pursue the source on a larger scale.  In several years’ time, the move could prove to be extremely beneficial to XOM—particularly if natural gas prices begin to trend toward the $7 mark.  Bearish minds will do well to buy into natural gas stocks, which are expected to rise over the next week; but proceed with caution as pending legislation could result in a total bust.