A Texas Oil Driller Banks a $26 Billion Deal, With Regrets

Endeavor Energy Resources founder Autry Stephens
Endeavor Energy Resources founder Autry Stephens

Summary

Autry Stephens, 85, said he is selling the oil driller he founded, Endeavor, sooner than he would have liked.

Autry Stephens, one of the last Texas wildcatters, is about to become one of the richest men in the world. He isn’t sure how he feels about it.

On Monday, he announced he would sell Endeavor Energy Resources, the company that sprang from a well Stephens drilled 45 years ago, to Diamondback Energy in a $26 billion stock-and-cash deal. Most of the proceeds will go to him and his family, yet Stephens was somber.

“There is certainly some sadness on my part," Stephens said in an interview Sunday, hours before the sale was announced.

The oilman for years held out on selling Endeavor, long viewed as one of the gems of the prolific Permian Basin in West Texas and New Mexico, turning down oil behemoths including Exxon Mobil. Stephens loved running the tightly knit company, where many employees spent their whole careers.

“I’ll miss the people there," he said of Endeavor. “It was kind of a little family."

In the end, what persuaded the 85-year-old billionaire to cash out was a diagnosis for prostate cancer. The treatment has left Stephens physically diminished and ready to sell.

“That was a big factor in this decision," he said.

The tie-up concludes a 62-year career that spanned the rise of the Organization of the Petroleum Exporting Countries, the feared decline of U.S. crude production, and its unexpected resurgence with the shale boom.

Stephens is joining the ranks of other private oil companies that are cashing in on shale riches, including rival CrownRock, which is led by Timothy Dunn and agreed to a sale to Occidental Petroleum for nearly $11 billion in December. The frenzy of deals has reshaped the oil patch, consolidating the scrappy drillers who set off the shale boom among larger producers seeking scale and premium acreage.

Endeavor is one of the last giant, privately held drillers. It has the largest remaining inventory of top-tier oil acreage of any private Permian company, according to energy-analytics firm Flow Partners, sitting on about 350,000 net acres and producing about 200,000 barrels of oil a day. The merger with Diamondback would create a juggernaut that will compete with the likes of ConocoPhillips and Exxon in the Permian.

Stephens and his family own almost all of Endeavor, and they are expected to receive virtually all of the fruits of the sale, which includes $8 billion in cash, according to people familiar with the matter. Before the announcement, Stephens had a fortune pegged at nearly $15 billion.

The taciturn Stephens is little-known outside of the oil patch. While his fortune dwarfs that accumulated by oil titans such as Dunn and T. Boone Pickens, Midland executives like to swap stories about Stephens’s parsimony.

The octogenarian favors Southwest Airlines flights, still drives an old Toyota Land Cruiser, and says he comes into his downtown office every day. For years he didn’t take any distribution and only recently started taking cash out from the company, according to people familiar with the matter.

“I’m always looking for another deal," Stephens said.

Stephens said he was diagnosed with cancer about a year ago. While his daughter Lyndal Greth sits on Endeavor’s board, Stephens said he thought putting her in charge of the company would be too much of a burden as she is raising children. He also has a son, who Stephens said wasn’t interested in the family business.

Greth said that her priority is focusing on her young children, and that it had been an honor to work with her father.

“His ambition, value system, and integrity is unmatched," she said.

Few Permian companies are as coveted as Endeavor. Six months ago, Exxon approached Endeavor to discuss a potential sale, Stephens said, but the conversations didn’t pan out.

Endeavor started a sales process in December, Stephens said. ConocoPhillips was a bidder, but Endeavor had more cultural affinities with Diamondback, he said. Diamondback’s office is down the street from Endeavor’s, and both companies’ operations are centered on the Midland Basin.

“Most of my employees will have a job, good job with Diamondback, so I’d say that would be the No. 1 factor," he said. He said building a good company was one of his proudest achievements. “Creating jobs, and trying my darnedest to make them permanent."

Stephens grew up in a farming community in De Leon, a small city in central Texas. His father only reached a fourth-grade education and established a dealership selling Massey Ferguson tractor equipment.

Stephens graduated from the University of Texas at Austin as a petroleum engineer and thought he would travel to exotic locales, such as the oil-rich Lake Maracaibo in Venezuela. “I just couldn’t see myself sitting behind a desk," he said.

Instead he joined Humble Oil—a forebear of Exxon. He took a two-year break to join the U.S. Army Corps of Engineers, serving as a lieutenant and platoon leader responsible for fuel installations. He then worked as a reservoir engineer for a Midland bank.

He drilled his first well in 1979 at 41 in Midland County, throwing his life savings into the venture, a move that he said “wasn’t very smart." In 1996, Stephens founded the Big Dog Drilling company. Despite its aspirational name, the company started with just one small rig.

He started Endeavor in 2000 and placed his personally owned assets in the new company. Five years later, he acquired the U.S. assets of French company Perenco, allowing Endeavor to grow its oil and gas production by 25%.

Stephens precariously rode the booms and busts of the business, and his company came close to the edge in both 2008 and 2014 when crude prices tumbled.

Starting in 2016, Endeavor refocused on drilling horizontal wells, a technique that combined with fracking unleashed gushers of oil from the once sleepy Permian basin.

In Midland, Stephens’s hard-work ethic has become local lore. But for hiatuses that he spends fishing in Alaska or on the Gulf Coast, the billionaire is still hard at work. Around the age of 74, when most oilmen retire, he was still picking how Endeavor’s wells should be perforated, said Bryan Sheffield, who founded and sold driller Parsley Energy.

When Chuck Meloy, Endeavor’s chief executive from 2016 to 2020, walked down the hall into the founder’s office, he would have to clear a chair full of land maps and geological maps before he could take a seat.

“I felt like it was his way of telling me where his head was without even saying a word," Meloy said.

The merger with Endeavor is a coup for Diamondback, a driller with a market capitalization of about $27 billion before the deal was announced.

Several years ago, Endeavor received a good offer to be acquired by Shell, Stephens said. Endeavor also had on-and-off conversations about a sale with Pioneer Natural Resources. He didn’t offer specifics as to why the engagements with Exxon, Shell or Pioneer didn’t lead to a sale.

Exxon announced last year it would acquire Pioneer.

“Oil people are always over-optimistic, so I think we might have sold out early," he said of the merger with Diamondback. “But we’ll still have an interest in—you know, the oil business."

The windfall from Endeavor’s sale is poised to make Stephens and his family among the 100 richest people in the world. When asked how he planned to use the proceeds, the billionaire was surprised by the question.

“I just haven’t thought about it," he said.

Collin Eaton contributed to this article.

Write to Benoît Morenne at benoit.morenne@wsj.com

Catch all the Corporate news and Updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.
more

topics

MINT SPECIALS

Switch to the Mint app for fast and personalized news - Get App

Chat with MintGenie