Endeavor Energy Partners, the top privately-held oil and gas producer in the prolific Permian Basin of west Texas and New Mexico, is considering a sale that could value the company at an astonishing $25-30 billion, according to a recent Reuters exclusive.
The news comes fresh off the heels of some absolutely massive M&A action among public oil independents, with the $60 billion tie-up between ExxonMobil and Pioneer Natural Resources followed by Chevron announcing the $50+ billion purchase of Hess Corp. Now the private players are looking to capitalize on the consolidation wave by monetizing their substantial acreage as well.
Driving the potential multi-billion dollar valuation is Endeavor’s premier 350,000 net acre position in the coveted Midland sub-basin, the sweet spot of the larger Permian. With oil prices still hovering near $80 per barrel despite recession fears, there remain plenty of companies willing to pay up for high-quality acreage that can drive efficient growth for years to come. And Endeavor’s assets definitely check those boxes.
The Visionary Behind Endeavor’s Rise
Endeavor traces its roots back 45 years when Texas oilman Autry Stephens founded the small independent. The 85-year old Stephens grew the company through shrewd acreage acquisitions and by managing costs tightly with vertically integrated services businesses.
Now with retirement on the horizon, Stephens has apparently decided that the time is right to capitalize on the current market enthusiasm and secure his life’s work’s future by selling Endeavor to one of the large public independents like an Exxon or Chevron. Certainly Stephens’ estate and early investors would realize a tremendous windfall from such a deal.
While Endeavor has reportedly considered offers before, this time the process seems to be progressing firmly with investment bankers at JP Morgan already preparing marketing materials for potential buyers. So while there’s no guarantee that Endeavor finds a buyer or completes a sale, things have moved beyond the tire-kicking stage.
Ripe for the Picking by “Big oil”
As mentioned previously, Endeavor’s footprint in the core of the Permian Basin makes the company a logical target for any number of deep-pocketed suitors from major integrateds to large E&Ps looking to expand their presence.
And most of the likeliest buyers like Exxon, Chevron, and ConocoPhillips have all recently pulled off huge, multi-billion dollar deals to consolidate acreage while still leaving their balance sheets relatively unscathed. Using their equity and maintaining strong investment grade credit ratings remains paramount for the majors.
For example, Chevron structured its takeover of Hess Corp such that the $50 billion price tag amounted to less than half of its current cash position. So the company would have no issues stepping up to buy another large, complementary Permian pure-play.
Of course Exxon is in the same boat having expertly engineered the Pioneer acquisition to be immediately accretive to earnings and cash flow. So whileAbsorbing all of Endeavor’s 350k acres might be a bridge too far for XOM, the supermajor could easily swallow a chunk of the company or join a consortium.
Not to be outdone, ConocoPhillips recently closed its buyout of existing partner Lime Rock’s 50% stake in the Canadian Surmont oil sands project proving its appetite for sizable deals remains healthy. CEO Ryan Lance has also been vocal about wanting to bulk up the company’s Permianpresence over the long term giving it both the strategic rationale and financial means to pursue Endeavor.
Each of these independent E&Ps seem well suited to provide a soft landing for founder Autry Stephens’ life work. Endeavor has quietly built up a world class asset base that now looks poised to fetch an exceptional valuation and secure a new, well-heeled owner. So investors will be following the sales process closely as a potential deal would recalibrate the consolidation environment. Of course, we will have to wait and see what 2024 ultimately has in store for one of the Permian’s great growth stories.