(Bloomberg) — When Autry Stephens struck out on his own in 1996 to pursue oil riches, he named his one-rig outfit Big Dog Drilling Co.
Twenty years on, the moniker seems prophetic. Stephens, 80, owns the largest closely held oil producer in Texas by production volume, Endeavor Energy Resources LP. The Midland-based firm has suitors including Exxon Mobil Corp. and Chevron Corp. weighing bids that could value the company at $15 billion, including about $1 billion of debt.
A sale of that magnitude would rank among the 10-biggest deals for a private energy company and make Stephens one of the world’s richest people. He and his family own all of Endeavor, which controls drilling rights on 329,000 net acres in the Midland Basin, a subsection of the Permian Basin of West Texas.
While oil’s drop of more than 30 percent in the past two months may deter some potential acquirers, Endeavor holds almost unparalleled opportunity for Big Oil: one of the last major land positions in private hands in the heart of the Permian Basin.
Land values in the shale-rich territory have soared as investors flocked to get a piece of the country’s most-productive oil region. A sale would tap into those lofty valuations and potentially give Stephens a fortune worth as much as $14 billion, which would rank him among the world’s 100 wealthiest people, according to the Bloomberg Billionaires Index. It would also make him the richest oil mogul in the U.S., ahead of Continental Resources Inc.’s Harold Hamm and George Kaiser of Kaiser-Francis Oil Co.
© Bloomberg Black Gold
Stephens, who grew up on a peanut and watermelon farm in central Texas, declined to comment on his wealth.
A chance to work in exotic locales lured him to the oil industry, according to a profile on the website of the University of Texas at Austin, his alma mater. He never took a job in Saudi Arabia or Indonesia, but he did accumulate a massive land portfolio in his home state.
After graduating with a degree in petroleum engineering, Stephens worked for Humble Oil, now part of Exxon Mobil, the Army Corps of Engineers and a local Midland bank, where, inspired by the entrepreneur clients he met, he decided in 1979 to forgo a corporate career track.
Over the following decades, he transitioned from an engineer-for-hire with little to his name to oil tycoon, buying up drilling rights and branching into various ancillary businesses such as trucking, well services and roustabout construction. He poured profits from drilling wells back into the business and used them to buy more land, according to a person close to Stephens who asked not to be identified discussing nonpublic information.
Stephens, bespectacled and balding, had an unexpected brush with fame as a reality star in the truTV documentary series “Black Gold,” made by the producer of “Deadliest Catch.” The billionaire was a key figure in the plot of Season 2, which centered on workers on a Big Dog rig racing to finish four wells in 50 days.
The televised sweat and drama depicts just a small part of Endeavor’s business. Less than 2 percent of the company’s Midland Basin acreage has been developed with horizontal drilling, a technique that helped unleash record U.S. oil production. That vast potential of untapped land is a significant draw for would-be bidders, though the sheer size means the pool of buyers is limited to those with the deepest pockets. Exxon made a similar deal in 2017 when it spent about $6 billion acquiring drilling rights from the Bass family.
The region is better placed than other shale fields such as the Eagle Ford in Texas and Bakken in North Dakota to survive the downturn, according to RS Energy Group. Its wells can make 30 percent returns with West Texas Intermediate at $45 a barrel, the Calgary-based researcher said. WTI traded for $51.68 a barrel at 9:31 a.m.
© Bloomberg Price of crude has tumbled 31 percent since October
Exxon is the “most logical” buyer for Endeavor, given its ability to pay, focus on the Permian and history of joint ventures with Stephens, RBC Capital Markets analyst Scott Hanold said in a note to clients last month.
Exxon is the Permian’s most active driller and aims to increase production from the basin to mitigate steep declines elsewhere.
Exxon Chief Executive Officer Darren Woods, who declined to comment on Endeavor during a Nov. 6 interview with Bloomberg TV, said his company has the capacity to do a deal of almost any size.
“It’s really a function of looking at the value that Exxon Mobil can extract and how we would integrate that into our portfolio,” he said.
Still, a mountain of cash isn’t necessarily what Stephens is seeking. He and his family would prefer to stage an initial public offering next year, allowing them to maintain control, according to people with knowledge of their thinking.
Endeavor’s valuation is also striking considering the company almost collapsed a decade ago. During the 2008 financial crisis, a group of banks spooked by liquidity concerns demanded Endeavor repay $100 million within six months. Stephens was forced to shut down all but a few of his rigs. And that was at least his third dramatic near-bust since he started working for himself almost 40 years ago.
“The history of the oil industry is full of stories of people making and losing fortunes several times over,” he said in the UT-Austin profile. “Don’t let fear of failure keep you from following your dream.”
Devon Pendleton and Kevin Crowley
With assistance from Kiel Porter and Dinesh Nair.
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