The possible sale of major US independent energy group Endeavor Energy Partners provides a timely yardstick for the pricing of the potential takeover of Santos by Woodside Energy.
Analysts suggest that Woodside’s offer will likely consist of an all-paper bid, offering a modest 12% premium at best. Endeavor stands out as a relatively more affordable and high-quality energy asset compared to both Woodside and Santos, owing to its unique position in the world’s largest energy market.
Endeavor is among the leading independent US producers and enjoys a prime position in the highly productive oil and gas region of the US – the East Permian Basin, situated around the historic energy hub of Midland.
Reports from US market and business media over the weekend indicate that Endeavor is exploring a sale that could potentially value the largest privately-held oil and gas producer at between $25 billion and $30 billion.
This prospective sale would mark almost 45 years since Texas oilman Autry Stephens founded the company that would eventually become Endeavor. The 85-year-old has enlisted the assistance of JPMorgan Chase bankers to initiate a sale process for Endeavor, testing market interest in the first quarter of the coming year.
Endeavor’s operations encompass 350,000 net acres in the Midland area of the Permian Basin. According to the company’s website, it boasts the capacity to produce over 400,000 barrels of oil equivalent (boe) per day, equivalent to approximately 150 million barrels annually. However, a report by Fitch Ratings last month indicated that its output in the three months leading up to June this year amounted to 331,000 boe or an annual rate of approximately 120 million boe.
In contrast, Woodside is currently producing at a rate of nearly 160,000 boe per day, while Santos produces more than 120,000 boe per day. Both Woodside and Santos are primarily gas producers, focusing on LNG, whereas Endeavor is predominantly an oil producer with some gas assets.
Due to Endeavor’s size and cost, market interest is expected to be somewhat limited, even though Texas is known for being one of the most favorable US states for oil producers. Additionally, Texas ranks among America’s largest producers of renewable energy, primarily wind and solar power.
In October, Exxon Mobil secured a $60 billion deal to acquire Pioneer Natural Resources, another US fracking company, while Chevron announced a $53 billion agreement to purchase Hess Corp, whose primary asset is a stake in the highly promising Guyana oil fields in collaboration with Exxon Mobil.
Fitch’s report highlighted that Endeavor’s production of 331,000 barrels of oil equivalent per day in the second quarter of 2023 marked a 25% increase from the corresponding period in 2022.