Houston Chronicle—HOBBS, N.M. — Yates Petroleum, a privately held company, was scooped up by Houston’s EOG Resources. Then the extensive Bass family holdings in the Permian Basin were bought by Exxon Mobil for $6 billion.
Now, another private oil and gas producer, Endeavor Energy of Midland, is up for sale, with Big Oil companies such as Royal Dutch Shell, Chevron and Exxon Mobil considered among the likely buyers.
As some of the top, family-owned oil producers are absorbed by the biggest players, Mewbourne Oil, a little known firm out of Tyler, has emerged as the Permian Basin’s top private operator. Mewbourne, founded more than 50 years ago, has cut a different path than many other exploration and production companies, preferring a low profile and focusing on southeastern New Mexico, even as other companies rushed to West Texas.
The company has grown steadily, but substantially over the years, making a transition from natural gas to more lucrative oil and, shielded from the pressures of Wall Street, planning and executing for the years — not the quarters — ahead. And in case you’re wondering, Curtis Mewbourne, the company founder, and his family aren’t interested in selling.
“We’re just very different, and we take a much longer-term view,” said Mewbourne President Ken Waits, who leads the company’s day-to-day operations. “We’re going to be in New Mexico for decades to come.”
That longer-term view is driven by Mewbourne’s desire to pass along the company to children and grandchildren. Mewbourne, 84, founded the company in 1965, persevering through the early years as it tried to stay afloat and uninterested in cashing out now even as the value of the company’s holdings in the booming New Mexico side of the Permian grows substantially.
Mewbourne has taken steps to ensure his family’s control far into the future. He has put in place a leadership team that includes Waits and younger executives and set the stage for his children and grandchildren — some of whom work in the company — to eventually take over the ownership. A lack of succession planning and family apathy toward the business can doom private companies, Waits said.
“Those things that normally give private companies trouble — that cause them to sell — have really been taken care of,” Waits said. “He’s very adamantly and regularly expressed his desire to his children and grandchildren that he would like to see the company carry on for generations to come.”
A University of Oklahoma graduate, Mewbourne founded his company before he turned 30. The company had some modest initial success, discovering the West Garden City Wolfcamp field east of Midland in Glasscock County. But it wasn’t as prolific as Mewbourne initially hoped. Seeking greater success in the western Permian, Mewbourne entered New Mexico for the first time in 1970.
But the company struggled to stay afloat financially until 1973, when Mewbourne hit it big with a natural gas well along the Pecos River in New Mexico, setting the stage for the company to solidify its financial viability for years to come. “If there was a time when the struggle for survival ended and the long journey to victory began, this was that time,” Mewbourne said previously.
The company continued along successfully, riding out the ebbs and flows of the energy sector. Then, in 2010, Mewbourne scored with significant oil and gas discoveries in the shale of New Mexico’s portion of the Permian Basin. Even when oil prices went bust from late 2014 through 2016, Mewbourne chugged along. The company scaled back activity, but always kept at least four drilling rigs in operation, Waits said. It didn’t lay off any workers.
Now, Mewbourne is drilling horizontal shale wells, with laterals extending two miles, and three or four wells per rig location — just as the biggest companies do. If anything, Waits said, Mewbourne Oil is operating better than ever as the Permian oil boom shifts its focus to New Mexico, which has seen more growth in drilling activity in the last year than anywhere else in the country.
Mewbourne holds about 225,000 acres in the Permian’s western lobe, called the Delaware Basin, which puts it in position to keep expanding in what is thought to be an oil-rich shale formation, said Andrew Dittmar, an analyst with Enverus, an Austin energy research firm. It also has the benefit of not having shareholders breathing down the leadership’s neck in search of short-term profits, allowing the company to move at its own pace and plot long-term strategies that aren’t pushed aside by one under-performing quarter.
“When the wave came, they happened to be sitting in a fantastic place,” Dittmar said. “They’re really insulated from the market pressures. They can pick and choose where they want to drill and how much they want to spend. The private operators tend to operate very quietly and Mewbourne certainly fits in that category.”
But Mewbourne is making noise in Hobbs, one of the two population centers, along with Carlsbad, in the New Mexico Permian. Mewbourne moved ahead building a big office complex in Hobbs during the last oil bust and now employs more people in Hobbs than at its Tyler headquarters, where about 100 people work.
Playing with the big boys
With about 180 full-time workers in Hobbs, Mewbourne is the biggest oil-producing employer in Lea County, according to the local economic development organization. Mewbourne’s remaining 200 employees are spread between Midland, the Texas Panhandle and Oklahoma.
New Mexico accounts for about 80 percent of Mewbourne’s total oil and gas production — a share that’s seemingly rising with each passing month. Nine of Mewbourne’s 11 operating rigs are in New Mexico, drilling a total of more than 100 wells per year. The company plans to add at least two more by early 2020, even as rig counts in West Texas and across the country decline.
Mewbourne largely focused on natural gas until the combination of hydraulic fracturing and horizontal drilling succeeded in unlocking crude oil in shale. In 2010, Mewbourne produced only 2,000 barrels of oil per day. Now, it’s up to nearly100,000 barrels a day. Mewbourne is one of the top five overall producers in the New Mexico portion of the Permian.
A 2019 report by the Norwegian research firm Rystad Energy described Mewbourne as the most efficient oil producer in all of New Mexico with breakeven costs of $29 per barrel — slightly lower than the breakeven point of one of the largest and most efficient Permian producers, Occidental Petroleum of Houston. That same report described Endeavor as the second-best in the Permian’s Midland Basin after Chevron.
“It is interesting to observe some presence of private operators among the top performers,” said Rystad partner Artem Abramov. “Mewbourne Oil and Endeavor Energy have been able to achieve basin-leading well economics in the Delaware New Mexico and Midland basins, respectively.”
Mewbourne and Endeavor are neck-and-neck for the top spot among private companies in Permian oil production. Endeavor, which operates entirely on the Texas side of the Permian, has a small lead, according to Enverus data. But, when including natural gas output, Mewbourne easily outpaces Endeavor in overall volumes. Mewbourne churns out more than 140,000 barrels of oil equivalent per day versus just over 130,000 from Endeavor.
Unlike many public companies, which slash jobs as stock prices fall during cyclical downturns, Mewbourne’s stability over the years has helped it to retain and recruit workers. While Mewbourne may not be able to poach the top engineers out of Houston and convince them to move to Hobbs, the company has scholarship and internship programs with the University of Oklahoma, Texas Tech and New Mexico Tech to provide a steady stream of talent.
Oklahoma’s petroleum engineering program is named the Mewbourne School of Petroleum and Geological Engineering and its part of the Mewbourne College of Earth and Energy. The school is celebrating its 100th anniversary this year. Curtis Mewbourne has given well more than $20 million to his alma mater over the years.
These days, Mewbourne Oil also is competing for talent with startups and other companies backed by private equity firms, which are always looking for an exit strategy. That often entails a sale to a bigger player and usually results in layoffs. But that’s not Mewbourne’s way. The company continues to focus on steady growth and a long future.
“How do you hire people when you don’t plan on being around in the years to come?” Waits said. “We’re the total opposite.”