Wednesday, January 18, 2017

Exxon Mobil buys Bass family holdings in Permian for $6.6 billion

ExxonMobil will operate its new Permain Basin holdings bought from the Bass family through its XTO Energy subsidiary in Fort Worth.
ExxonMobil will operate its new Permain Basin holdings bought from the Bass family through its XTO Energy subsidiary in Fort Worth. Ron Jenkins Star-Telegram archives

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Exxon Mobil is buying 275,000 acres in the booming Permian Basin oil fields from the Bass family for $5.6 billion in stock and $1 billion in contingent cash payouts.

The Irving-based oil company said Tuesday that the purchase covers 3.4 billion barrels of oil equivalent, nearly doubling its existing resources in the Permian to 6 billion barrels. XTO Energy in Fort Worth, which was sold to the energy giant in 2010, will manage the project.

“This acquisition strengthens Exxon Mobil’s significant presence in the dominant U.S. growth area for onshore oil production,” Darren W. Woods, Exxon Mobil chairman and chief executive officer, said in a statement. “This investment gives us an exceptional Delaware Basin position in a proven multi-stacked play that can generate attractive returns in a low-price environment.”

Frank McCreight, a representative of Bass family’s energy holdings, could not be reached for comment. Other Bass representatives also declined to comment when contacted by the Star-Telegram. “The Bass family does not generally speak about business dealings,” one spokesman said.

Forbes reported that Sid Bass directly negotiated the sale of the acreage with Rex Tillerson, Exxon Mobil’s former chief executive officer who has been nominated by President-elect Donald Trump to become the next secretary of state.

The deal marks a milestone for the Bass family, which has leveraged its wealth and business acumen over the years to advance downtown development and cultural institutions in Fort Worth.

The family fortune started in the oilfields. Sid Richardson, a Fort Worth bachelor who struck it rich in West Texas in the 1920s, went broke in the Great Depression, then remade his fortune in the late 1930s and the 1940s. When he died in 1959, he devoted $100 million to establish a foundation, and left the rest to his nephew, Perry Bass, and Bass’ four sons, Sid, Ed, Robert and Lee.

The Bass brothers parlayed that inheritance into bigger fortunes through a series of savvy investments, including a big stake in the Walt Disney Co. And they became leaders in modernizing downtown Fort Worth, first with the construction of the Worthington Hotel and the City Center towers, then with Sundance Square and the Bass Performance Hall.

Exxon Mobil has 10 rigs working in the Permian and plans to add 15 or more after the acquisition closes in the first quarter of 2017, said SuAnn Guthrie, a spokeswoman for Exxon Mobil. She said a large majority of the acreage is expected to have attractive returns at $40 a barrel.

It is the seventh transaction in the Permian Basin by Exxon Mobil in the last three years and its largest since the company bought XTO in 2010, she said.

The acquired companies include BOPCO, and some of the Bass employees will be offered opportunities at XTO, she said. Guthrie didn’t have any estimates on future hiring, since the acreage is held by current production not by continuous drilling obligations.

Through the acquired companies, BOPCO controls about 275,000 acres of leasehold with production of more than 18,000 net oil equivalent barrels per day. This includes about 250,000 acres of leasehold in the Permian Basin, the bulk of it in contiguous, held-by-production units in the New Mexico Delaware Basin.

“The highly-contiguous position will provide significant cost advantages in developing 3.4 billion barrels of resource, of which 75 percent is liquids,” Woods said in his statement. “By utilizing Exxon Mobil’s technological strength coupled with its unconventional development capabilities we can drill the longest lateral wells in the Permian Basin, reducing development costs and increasing reserve capture.”

Rebound in West Texas

The deal is the latest in a string of large acquisitions in the Permian Basin. On Monday, Noble Energy announced that it was paying $2.7 billion in stock and cash for Clayton Williams Energy in West Texas. Exploration companies, including the major oil companies that once ignored it, have been rushing to the Permian in recent years because of its rich deposits and the ability to make money at lower oil prices.

“We witnessed a transformation in the Permian Basin 20 years ago. They [the major oil companies] were bailing out right and left,” said Karr Ingham, an economist with the Texas Alliance of Energy Producers. “‘There is a new bloom on that rose and [the Exxon Mobil purchase] is very indicative of what is going on out there.”

“When you’ve got a company like Exxon Mobil that has the resources to develop plays all over the world and they elected [to focus on] the Permian, that tells you a lot about its resurgence as a globally significant production region,” he said.

David Martineau, former executive at Pitts Oil Co. in Dallas, said the Permian is hot not only because of its overall reserves of 3.4 billion barrels, but because it has multiple zones that producers are able to tap using advanced hydraulic fracturing techniques, or fracking.

“That makes a big difference,” Martineau said, adding that “the prices of drilling and fracking are coming down, so they can do better and bigger frack jobs.”

Martineau, the former chairman of the Texas Independent Producers and Royalty Owners Association, said the Exxon Mobil purchase was all the talk Tuesday at a luncheon of oil industry geologists in Dallas.

“It caught people by surprise. Nobody thought the Basses would be selling,” Martineau said. People at the luncheon were joking that the Basses would “take the money and quadruple the size of Blue Bell Ice Cream,” a reference to Sid Bass’ $125 million investment in the ice cream maker in 2015 after a listeria outbreak.

Deep Bass family roots

The Bass family previously sold other assets in West Texas, including the 2005 sale of the Sid Richardson Energy Services Co. to Southern Union Co. for $1.6 billion. In the deal, Southern Union got more than 4,600 miles of gas pipelines and 10 processing and treatment plants that served the system that delivers gas to and from 16 counties in the Permian.

Perry Bass’s four sons all maintain their own investment concerns and routinely are listed on the Forbes list of the 400 richest people in America. In 2016, Forbes listed Ed, Sid and Lee Bass with net worth of $1.8 billion each, while Robert Bass’ net worth was estimated at $2.8 billion.

Sid Bass, 74, formed a formidable partnership with the late investment guru Richard Rainwater, who convinced the family to invest successfully in a number of companies, including a large stake Disney.
Ed Bass, 71, is widely known for his work, along with his brothers, helping to rebuild downtown Fort Worth, including the construction of the Nancy Lee and Perry R. Bass Performance Hall in honor of their parents.

Robert Bass, 68, broke away from his siblings to run his own private equity firm, Oak Hill Capital Partners, which is involved in a number of projects including development of a supersonic transport plane. He and his wife, Anne, also are known for their work in Fort Worth.

Lee Bass, 60, and his wife, Ramona, are major benefactors of the Fort Worth Zoo. In 2014, they pledged $30 million to commemorate 30 years of service to the Fort Worth Zoo and its programs.

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