As a wave of consolidation sweeps through the global oil and gas industry, three secretive, family-owned Texas oil companies are in the spotlight.
Mewborn Oil, Endeavor Energy Resources, and Crown Rock are the largest privately owned producers in the Permian Basin of Texas and New Mexico, the engine room of America's oil industry.
These three companies are now prime acquisition targets as major utilities scour the market for options to increase production firepower.
“They're pretty evenly matched in terms of business size,” said Matthew Bernstein, an analyst at consulting firm Rystad Energy.
Mewborne, Endeavour and Crown Rock are tightly-knit family businesses built from the ground up over decades by enterprising wildcatters – so far they have all resisted offers to sell.
But two big deals last month by ExxonMobil and Chevron, the largest U.S. oil companies, have enabled major oil companies to recover dwindling resources and build up needed inventories to supply crude oil for decades to come. They were in a hurry to increase their numbers, and the situation changed completely.
“These companies represent a family legacy and one of the last opportunities for the private sector to purchase high-quality Permian inventory at scale,” said Enverus analyst Andrew Dittmar. . “A sales process by either of them would attract interest from multiple large public producers.”
mewbone oil
Mewborn is the most active private driller in the Permian and one of the most active private drillers overall. As of last weekend, there were 19 rigs in operation, with only Occidental Petroleum and Pioneer Natural Resources having more.
The company was founded in 1965 by Curtis Mewborn, who passed away last year. He has long maintained that he had no intention of selling. “Nobody can have a proper discussion with them,” said one person who has been following the company closely. “It's like a banker's dream that never came true.”
The Mewborn family, who still control the company, said their position will not be changed by the death of their patriarch. But some believe that could change.
“My feeling is that maybe they don't want to merge with anyone. But you never know. The family lost their father last year,” said John, who has worked closely with the company. said one executive. “That would be possible. And it would be a pretty big purchase.”
Mewbone has been the biggest contributor to U.S. oil production growth in recent years, surpassing its pre-coronavirus peak and setting a new record in August.
Utilities under pressure to return cash to shareholders have been more cautious about drilling new wells, but Mewborn has increased its Permian production from 129,000 barrels of oil equivalent per day (bpd) in early 2019 to 371,000 bpd in August, according to Rystad.
“It takes courage to be a little contrarian,” CEO Ken Waits said in a recent video interview with Heart Energy, the oil industry's online newspaper and magazine publisher. “The best time to drill oil wells is when costs are low. The best time to invest is when there is blood in the streets.”
The company did not respond to an interview request.
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tackle energy resources
The next big target is Endeavor, an old-school Texas oilman owned by Autry Stevens, one of the state's richest men, worth $14.8 billion today, according to the Forbes billionaires list.
A self-made wildcatter, Stevens went into business on his own in 1979 with a single rig. Endeavor Inc. spun off from his business in 2000 and has grown to become one of the nation's leading private operators.
“I overcame my lack of aptitude for engineering by being highly motivated, creative, and a risk-taker,” he told students at the University of Texas at Austin.
Rystad said Endeavor pumped 391,000 barrels per day in the Permian in August, tying it with Mewborn for the title of largest private company in the United States outside of Alaska. Like Mewborn, and in contrast to many utilities, the company has ramped up production rapidly since the pandemic. And like Mewborn, it owns an enviable trove of unexcavated land, making it a prime target for consolidation.
“These companies, especially Mewborn and Endeavor, have significant inventory.” [that] “It's a very attractive asset for companies looking to scale up and compete with Chevron and Exxon,” Bernstein said.
Endeavour has been on the market off and on for years, attracting significant interest from suitors in 2018, but no one has ever made an offer big enough to satisfy Stevens.
Traditionally publicity-shy, Stevens rose to national prominence in 2008 as the star of a reality documentary series. Black Goldwhich followed the roughnecks working on his “Big Dog” oil rig.
Endeavor declined to be interviewed. “Mr. Stevens and his team prefer to maintain a low profile,” a spokesperson said.
crown lock
The third major company is Crownrock, led by Tim Dunn, former chief financial officer of what later became Pioneer Parker & Parsley.
Mr. Dunn, an evangelical Christian, has poured millions of dollars into Republican campaigns in recent decades and has gained a national reputation as a conservative donor.
CrownRock is a subsidiary of CrownQuest, which was founded by Dunn in 1996 and operates the group's wells. It was created in 2007 as a joint venture between Crown Quest and private equity house Lime Rock.
Although the company has become less of a growth driver in recent years than Endeavor and Mewborn, it is still growing significantly, producing about 226,000 barrels per day in the Permian.
The company is reviewing its sales process, the people said. “This is a large, high-quality asset. We expect it to attract a lot of buyers,” said a banker not directly involved in the negotiations.
Mr. Dunn is a fierce critic of government overreach, saying, “It has amassed the power to decide everything and control the daily lives of Americans with the aim of turning most Americans into de facto indentured serfs.'' He slams Washington for “sticking its nose” in decisions. Servants of the Almighty King DC.”
The company did not respond to requests for an interview.
Ever since Exxon and Chevron fired the gun in their merger race, all eyes are on who will strike next. Dealmakers say big companies like ConocoPhillips, Occidental and Devon could be next.
People involved in the Mewborn, Endeavor and Crownrock trades said the phones were likely to continue ringing for months to come.
“This is probably the best opportunity to add inventory to a privately held deal,” said Raoul LeBlanc, an analyst at S&P Global. “The field is pretty narrowed down to these three.”
Additional reporting by Amanda Chu in New York
