February 1, 2017 / 7:12 PM / 3 years ago

Exclusive: Endeavor, giant of West Texas oil industry, mulls public offering

MIDLAND, Texas (Reuters) - Endeavor Energy Resources LP, a privately-held Texas oil producer, is considering an initial public offering of stock to expand operations on more than 330,000 acres of land it controls in the booming Permian Basin.

Endeavor is among the largest leaseholders in the biggest U.S. oil field, where acreage is coveted by the world’s top energy firms. Exxon Mobil (XOM.N) last month spent as much as $6.6 billion to double its holdings in the Permian.

Firms last year spent more than $28 billion acquiring land here, and are now pumping about a quarter of all daily U.S. oil output.

The IPO “is one of our options” for financing, Chief Executive Chuck Meloy told Reuters in an interview at Endeavor’s Midland, Texas, headquarters. The company has also been courting the bond market, he added.

Meloy declined to give further details on the pricing target for an IPO, the timing, or the amount of capital that Endeavor is seeking to raise.

A procession of companies have launched IPOs to fund a quick increase in activity in the Permian and capitalize on a rebound in U.S. oil prices from a 12-year low hit in February 2016.

One of the latest was Jagged Peak Energy Inc Jag.N, which raised nearly half a billion dollars despite pricing below its target. [L1N1F91PM]

Meloy, who retired from Anadarko Petroleum Corp P.ACN in 2015, was hired to run Endeavor last February by Autry Stephens, the company’s founder and a famed wildcatter.

Stephens was featured in the reality TV show, “Black Gold,” which aired on Time Warner’s TWX.N TruTV from 2008 through 2013.

QUESTIONABLE DEALS

When Meloy was hired, Endeavor was mired in debt and selling off some of its lease holdings for cash. Meloy sold about 10 percent of the company’s acreage for $1.3 billion to reduce that debt to below $500 million.

The ensuing rally in land prices in the Permian Basin has made some of those transactions look like poor deals.

Endeavor sold some acreage last January for an undisclosed amount to private equity-backed Luxe Energy LLC, which flipped the land a few months later for $560 million.

“If we didn’t have to do it, we wouldn’t have done it,” Meloy said of the land sales. “Thankfully, we had a currency we could use to rebuild our balance sheet.”

The company still has around 334,000 acres in the eastern Permian, known as the Midland Basin.

Endeavor has strengthened its team of geologists and engineers in the past six months to help plan drilling on the land that remains. The company estimates its land holds crude, condensate and gas reserves that combined are the equivalent of 96 million barrels of oil.

The company is bringing in a fifth drilling rig to its patch next week, having added a fourth in January, Meloy said.

The goal for 2017 is to bring 75 horizontal wells online, adding to its existing 5,000 vertical wells and 45 horizontal wells.

Endeavor is profitable with oil prices CLc1 of about $40 per barrel, Meloy said. The current price is about $53.

Reporting by Ernest Scheyder; Editing by Simon Webb and Brian Thevenot

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