As a torrent of consolidation washes over the global oil and gas industry, three secretive, family-owned Texas oil companies have been thrust into the spotlight.
Mewbourne Oil, Endeavor Energy Resources and CrownRock are the biggest privately owned producers in the Permian Basin of Texas and New Mexico, the engine room of America’s oil industry.
Now, with large public operators scouring the market in search of options to bulk up their production firepower, these three companies have become prime acquisition targets.
“They pretty much are in a league of their own when it comes to the scale of their operations,” said Matthew Bernstein, an analyst at consultancy Rystad Energy.
Closely held family operations built from scratch by enterprising wildcatters — the speculative oil drillers — over decades, Mewbourne, Endeavor and CrownRock have so far all resisted offers to sell out.
But two megadeals in the past month by ExxonMobil and Chevron, the biggest US oil companies, have changed the narrative as bigger operators rush to snap up dwindling resources and build up the inventory needed to allow them to pump crude for decades to come.
“These companies represent both family legacies and among the last opportunities on the private side to buy high-quality Permian inventory at scale,” said Andrew Dittmar, an analyst at Enverus. “A sales process by any of them will draw interest from multiple big public producers.”
Mewbourne is the most active private driller in the Permian — and one of the most active overall. With 19 rigs in the field as of the end of last week, only Occidental Petroleum and Pioneer Natural Resources are running more.
The company was founded in 1965 by Curtis Mewbourne, who died last year. He had long insisted it was not for sale. “No one can have a reasonable discussion with them,” said one person who has followed the company closely. “It’s like the banker’s dream that never happened.”
The Mewbourne family, who still control the company, have said that the death of the family patriarch does not alter their position. But some reckon that could change.
“My sense is that probably they are not looking to merge with anyone. But you never know: the family lost their dad last year,” said one executive who has worked closely with the company. “It would be possible. And it would be a pretty big buy.”
Over recent years, Mewbourne has been one of the biggest contributors to growing US oil production, which hit a new record in August, surpassing its pre-Covid-19 peak.
While public operators, under pressure to return cash to shareholders, have taken a more cautious approach to drilling new wells, Mewbourne has ramped up Permian production from 129,000 barrels of oil equivalent a day in early 2019 to 371,000 in August, according to Rystad.
“It takes some courage to have a little bit of a contrarian attitude,” said chief executive Ken Waits in a recent video interview with Hart Energy, the online oil industry newspaper and magazine publisher. “The best time to be drilling wells is when costs are low . . . The best time to be investing is when there’s blood in the streets.”
The company did not respond to a request for an interview.
Endeavor Energy Resources
The next prized target is Endeavor, owned by Autry Stephens, an old-school Texas oilman and one of the wealthiest individuals in the state. His fortune today is worth $14.8bn according to the Forbes billionaires list.
A self-made wildcatter, Stephens went into business on his own with a solitary rig in 1979. Endeavor sprang out of that venture in 2000 and rose to become one of the leading private operators in the US.
“I overcame my lack of an engineering aptitude by being highly motivated, creative and a risk-taker,” he told students at the University of Texas, in Austin.
Endeavor pumped 391,000 boe/d in the Permian in August, according to Rystad, leaving it neck and neck with Mewbourne for the title of the biggest US private player outside Alaska. As with Mewbourne, and in contrast with many public operators, the company has ramped up production sharply since the pandemic. And like Mewbourne, it owns an enviable trove of yet-to-be-drilled acreage — that has made it a prime target for consolidation.
“These are companies — especially Mewbourne and Endeavor, that have sizeable inventories [that] become, I’d say, a very attractive asset for a company that’s looking to scale up and compete with a Chevron or an Exxon,” said Bernstein.
Endeavor has been on the market intermittently over the years, attracting significant interest from suitors in 2018. But no one has ever offered enough to satisfy Stephens.
Traditionally publicity averse, Stephens became known across the US in 2008 as the star of the reality documentary series Black Gold, which followed roughnecks working on his “Big Dog” oil rig.
Endeavor declined to be interviewed. A spokesperson said: “Mr Stephens and team prefer to keep a low profile.”
The third major player is CrownRock, led by Tim Dunn, former chief financial officer of Parker and Parsley — a company which later became Pioneer.
An evangelical Christian, Dunn has gained prominence nationally as a conservative donor, pumping huge sums of money into Republican campaigns over recent decades.
CrownRock is a subsidiary of CrownQuest, which was founded by Dunn in 1996 and operates the group’s wells. It sprung out of a joint venture between CrownQuest and private equity house Lime Rock in 2007.
While the company has been less of a growth engine than Endeavor and Mewbourne in recent years, it has still grown significantly and produces about 226,000 boe/d in the Permian.
People familiar with the matter have said the company is weighing a sales process. “It is a large, high-quality asset — I expect a lot of buyers to look at it,” said one banker not directly involved in the talks.
Dunn has been a fierce critic of government over-reach, lashing out at Washington for “sticking its nose” into the everyday decisions of Americans “with a goal to accumulate the power to make them all, effectively rendering most Americans virtual serfs, mere indentured servants of almighty King DC”.
The company did not respond to a request for an interview.
Since Exxon and Chevron fired the starting gun on the race to consolidate, all eyes are on who could strike next, with big operators such as ConocoPhillips, Occidental and Devon among the next poised to do so, dealmakers say.
At Mewbourne, Endeavor and CrownRock, dealmakers said phones were likely to be ringing consistently over the coming months.
“I would say they probably represent the best opportunity to ramp up by inventory with a deal with a private,” said Raoul LeBlanc, an analyst at S&P Global. “The pickings are pretty slim and these are the three.”
Additional reporting by Amanda Chu in New York