Jagged Peak Energy Owners Exploring Sale, IPO

The owners of West Texas oil producer Jagged Peak Energy LLC are exploring a sale of the company amid a land rush in the region where the company drills.

Jagged Peak is expected to fetch more than $2 billion if it is sold outright, according to people familiar with the matter. Its private-equity backer, Quantum Energy Partners, also is exploring an initial public offering of the company, some of the people said.

A sale of the company, which Quantum and a group of oil executives started with $400 million in April 2013, would come during a flurry of drilling and deal activity in the sought-after Permian Basin despite oil prices that are mired in their worst slump in years.

About $12.5 billion, or about half of all the money paid so far this year for U.S. onshore drilling properties, has been spent in the Permian Basin, according to RBC Capital Markets. The region typically accounts for about 15% of overall oil field deal activity.

The push to stake a claim to drilling land there has kept prices for acreage at or, in some cases, above what it cost two years ago, when oil traded for more than $100 a barrel. U.S. crude for October delivery closed down 1.34% at $46.35 a barrel Tuesday.

Reuters earlier reported that Jagged Peak was considering an IPO.

Public companies have been big buyers in the Permian, seeking to expand their holdings or secure a toehold in what has emerged as one of the few regions where drilling can be economical at low oil prices.

Investors have encouraged such moves, gobbling up $6.25 billion of new shares sold this year by oil producers that have said they plan to use at least some of the proceeds to acquire Permian properties.

Jagged Peak controls a swath of drilling land in the Delaware Basin in West Texas, a particularly popular section of the Permian that runs along the Pecos River south of New Mexico.

More lightly explored than the Midland Basin, which lies to the northeast, the Delaware Basin has offered room for expansion for established West Texas explorers and lured new arrivals hoping for better returns than they produce in other areas.

Last week, Wall Street investment giant Blackstone Group LP said it committed $1 billion to a new Delaware Basin drilling venture, while PDC Energy Inc., a company that operates in the Appalachian and Rocky Mountains, said it agreed to pay a New York investment firm $1.5 billion for rights to drill on 57,000 acres there.

Write to Ryan Dezember at [e-mail], Dana Mattioli at [e-mail] and Matt Jarzemsky at [e-mail]

(END) Dow Jones Newswires

August 30, 2016 21:15 ET (01:15 GMT)

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