Clayton Williams Energy Inc., the oil and gas company run by Texas wildcatter Clayton “Claytie” Williams Jr., is exploring a sale, according to people familiar with the matter.
The shale producer is working with a financial adviser to solicit offers from potential buyers, said the people, who asked not to be identified because the matter isn’t public. The company has just begun reaching out to suitors and it may decide to remain independent, one person said.
Shares of the Midland-based company rose as much as 25 percent to $69.37 after Bloomberg reported the company’s interest in selling, and closed up 9.6 percent at $60.78. Before the news, Clayton Williams was up 2 percent Wednesday, giving it a market value of about $690 million. A buyer would also have to absorb another $745 million in outstanding debt.
Clayton Williams is the latest small oil driller to go on the block since crude prices crashed last year, putting the industry into a tailspin. Analysts have pegged it as a potential takeover target since Noble Energy Inc. agreed to pay about $2.1 billion in May for Rosetta Resources Inc., another Permian and Eagle Ford driller.
A representative for Clayton Williams Energy did not immediately return two calls requesting comment.
A Clayton Williams executive alluded to the prospect of an outright sale in August while discussing the company’s strategy for navigating the downturn.
“We are considering everything,” Clayton Williams President Mel Riggs said during a presentation at an industry conference sponsored by EnerCom Inc., according to a transcript compiled by Bloomberg. “We have to keep an eye on the exit. There’s a point where that may be the right thing to do.”
Clayton Williams – whose namesake founder and chief executive started the company in 1991 after an infamous failed campaign for Texas governor – has good assets but a bad balance sheet, according to analysts. What that means is it controls a lot of high-value land — about 340,000 acres in two of the most productive shale basins in the U.S. — but can barely afford the operating expenses need to tap into it.
As of mid-August, all but two of its 14 company-owned rigs had been idled after drilling was temporarily halted earlier in the year to lower costs, Riggs said last month.
Clayton Williams Energy lost close to $42 million in the first half of 2015 after earning almost $21 million a year earlier, according to its second-quarter financial report.