Permian Oil Producer Brigham Resources Weighing Sale, IPO
October 10 2016 - 4:20PM
Dow Jones News
Bankers are sounding out potential buyers for Brigham Resources
LLC while the oil explorer simultaneously prepares for an initial
public offering amid a red-hot market for West Texas drilling
property.
Brigham Resources, founded four years ago by shale-drilling
pioneer Ben "Bud" Brigham, is working with lawyers and bankers to
prepare for a stock-market debut early next year, while also
gauging the interest of larger energy companies in buying the
Austin, Texas, company outright, according to people familiar with
the matter.
Based on prices other companies operating nearby have fetched in
recent months, Brigham's 72,000 acres of drilling land could be
worth well over $2 billion.
For Mr. Brigham, a deal could represent the sort of win that has
eluded several other shale pioneers in their attempted second
acts.
A geophysicist by training, Mr. Brigham started Brigham
Exploration Co. in 1990 with $25,000. The company struck fortune in
North Dakota, using new drilling techniques to extract huge volumes
of crude from deeply buried shale formations. In late 2011,
Norway's Statoil ASA bought Brigham Exploration for $4.4
billion.
Between the stock he owned in the company and his severance
package, Mr. Brigham came away from the sale with about $100
million, according to securities filings.
He went on to launch real-estate and film-production ventures.
In 2012, Mr. Brigham and his former finance chief Gene Shepherd got
back into the oil business and were courted by several investment
firms eager to finance their second act.
They eventually decided to work with three New York
firms—Warburg Pincus LLC, Pine Brook Partners LLC and Yorktown
Partners LLC—that together committed $650 million to the new
company. Mr. Brigham took the role of chairman and Mr. Shepherd
became chief executive, and they began acquiring drilling rights in
the Permian Basin.
New drilling techniques have made Permian wells so prolific that
crude can be extracted profitably despite the low oil prices that
have made drilling in many other regions uneconomical. That has
sparked bidding wars for drilling land and presented opportunities
for private-equity firms to sell out of past investments profitably
at a time when many of their other oil-patch wagers have been
hammered by low commodity prices.
Meanwhile, the stock market is valuing companies operating there
at a premium to energy producers that drill elsewhere, which could
provide incentive for closely held Permian explorers to pursue
stock listings instead of sales.
Permian-focused producers are currently trading at about 13
times earnings before interest, taxes, depreciation, and
amortization, or Ebitda, compared with the roughly eight to nine
times that earnings metric that companies operating in other
drilling regions, according to Roth Capital Partners LLC.
Write to Ryan Dezember at ryan.dezember@wsj.com and Dana
Mattioli at dana.mattioli@wsj.com
(END) Dow Jones Newswires
October 10, 2016 16:05 ET (20:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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