Yates Petroleum Corp., one of the largest closely held U.S. oil producers, is seeking a buyer in a transaction that may generate billions of dollars, said three people with knowledge of the matter.
The company, controlled by members of New Mexico’s Yates family, has solicited bids in recent days from some of the world’s biggest oil companies, said the people, who spoke on condition of anonymity because the matter is private. The company is working with JPMorgan Chase & Co. (JPM:US), the people said.
Yates’s finances aren’t public, making it difficult for outsiders to estimate how much the company might be worth. Oil & Gas Financial Journal estimated in 2009 that Artesia, New Mexico-based Yates was the fourth-largest private oil and natural-gas company in the U.S., producing the equivalent of 8.77 million barrels of oil.
A sale may be the largest of a family-owned oil company since a KKR & Co.-led group bought Samson Investment Co. for $7.2 billion last year. Two different arms of Tulsa, Oklahoma- based Samson, owned by the Schusterman family, were ranked third and fifth on Oil & Gas Financial Journal’s list, with a total of 22 million barrels of production.
The Yates family is seeking to complete a transaction before the end of the year, when the U.S. income tax rate on capital gains is due to increase, the people said. Members have also discussed selling shares to the public, the people said.
James Lucas, a spokesman for Yates Petroleum, said the company doesn’t comment on speculation. Tasha Pelio, a spokeswoman for JPMorgan, declined to comment.
Yates may be seeking to benefit from growing interest among major oil companies in the Permian Basin, an oil-rich stretch of west Texas and southern New Mexico, which had its first oil boom almost a century ago. It’s the most active drilling area in the U.S., according to Bloomberg Industries.
“When you look for potential opportunities in adding and growing a resource base, the Permian Basin is clearly one that stands out,” Scott Hanold, an analyst at RBC Capital Markets LLC in Minneapolis, said in a telephone interview today. “The advent of some of the new horizontal technology is just starting to take hold in the Permian.”
Chevron Corp. (CVX:US), Royal Dutch Shell Plc (RDSA), and Apache Corp. (APA:US) have all agreed to major acquisitions in the Permian Basin since the start of 2010. That year, Concho Resources Inc. bought the assets of Yates’ crosstown rival, closely held Marbob Energy Corp., for $1.65 billion.
Wildcatter Martin Yates Jr. pioneered oil and gas exploration in New Mexico in the 1920s, when, according to family lore, his wife’s intuition directed him to the location of his first successful well. His grandchildren are now involved in the business.
Different branches of the family control affiliated oil and gas companies, adding to the complexity of a potential sale, the people said. As many as 20 different Yates companies, backed by different family members, sometimes compete against each other for projects, the New York Times reported in 2004.
Yates was the largest holder of leases to drill for oil and gas on U.S. government land, according to a 2004 report by Environmental Working Group, a Washington-based organization that is critical of the government’s leasing policies. The company operates in 13 states, with most of its production in New Mexico and Wyoming, according to a 2009 statement by one of Yates’ technology vendors.
One related company, Yates Drilling Co., was sold to Occidental Petroleum Corp. (OXY:US) in 2010, the New Mexico Business Weekly reported that year, citing sources including an executive at another local oil company. Neither Yates Drilling nor Occidental confirmed the sale to the Business Weekly.
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