Properly accounting for AROs as part of due diligence in an oil and gas transaction is essential for ensuring a fair and accurate valuation of the assets being bought or sold. These obligations represent significant future liabilities, and failing to account for them properly can lead to financial misstatements, regulatory issues, and unexpected costs for the acquiring party. In this week’s post, we discuss AROs in the oil and gas industry and why they matter in transactions.
Mercer Capital attended the NAPE (North American Prospect Expo) summit on February 5th and 6th, 2025, in Houston, Texas. More than 12,000 primarily upstream oil and gas industry professionals from a wide cross-section of disciplines attended the conference to discuss business opportunities, explore investments, and sharpen their knowledge base. In this week’s post, we focus on four primary themes that emerged from our attendance at various panel discussions featuring operational and financial industry participants as well as policymakers from Washington, D.C.
The Uinta Basin is a geological formation located in northeastern Utah that extends into Western Colorado on its easternmost front where it is bound by the Piceance Basin. The Uinta Basin is rich in oil and gas reserves and is a stacked formation with pay zones ranging from around 1,300′ to 18,000′ in depth. Major oil discoveries led to the basin’s first significant development in the 1940s. With the rise of hydraulic fracturing (fracking) and horizontal drilling, the basin’s relevance has resurged, making it a hotspot for tight oil development and a significant contributor to U.S. oil and gas production. We explore the Uinta Basin’s resurgence in this week’s post.
Natural gas markets continue an optimistic trend towards greater demand to meet a U.S. supply glut. The incoming Trump Administration has promised to pull back regulatory restraints and unleash the industry to “drill baby drill.” However, when it comes to natural gas, there is already plenty of supply; the question is, can that supply become more portable to meet global (instead of regional) demands? We explore this question and a potential answer in this week’s post.
As a supplement to our usual regional coverage, this quarter we take a closer look at the Bakken, DJ Basin, and Woodford Shale. On an oil equivalent basis, the DJ Basin ended the review period 2% below production levels from a year earlier, while the Bakken ended at nearly 5% lower. Only the Woodford Shale ended the review period at a level above its November 2023 production, though at a negligible 0.1% higher. While not nearly in the same league as the powerhouse Permian Basin, the Bakken Shale, DJ, and Woodford Shale play an important role in U.S. energy production.
The November election brought optimism to many oil producers who felt hamstrung by the Biden Administration’s policies. However, administrations can only do so much when it comes to global supply and demand dynamics. In fact, they can usually do little in the big picture; and the big picture is that there is probably going to be more supply coming online in 2025 than demand to meet it. Therefore, U.S. upstream producers are not planning on blowing their budget on aggressive drilling plans, no matter what Trump says, especially considering the lukewarm pricing environment that the market foresees. In addition, the U.S.’ shale dominance may be headed towards inevitable decline. We consider the 2025 U.S. oil and gas outlook in this week’s post.
While not nearly in the same league as the powerhouse Permian Basin, the Bakken Shale, DJ, and Woodford Shale play an important role in U.S. energy production. While these basins mostly experience the same impacts that U.S. energy policy and geopolitical matters have on the primary U.S. basins, they each have unique characteristics that differentiate them from the larger basins and each other. In this post, we depart from our regular coverage and take a closer look at the Bakken, DJ Basin, and Woodford Shale.
This week, the Mercer Capital Oil and Gas team highlights four popular, but less talked about oil and gas plays: the Uinta Basin, Bakken Shale, DJ Basin, and SCOOP/STACK. From the Uinta’s unique transportation challenges to the Bakken’s enduring output, the DJ’s infrastructure, and the SCOOP/STACK’s operational complexities, we explore their economic profiles and recent M&A activity.
Year-end 2024 is quickly approaching so that means it’s time to take a look back at the year. Here are the top ten posts for the year measured by readership. Click on any of the post titles to revisit the post. Thank you to our readers for your constant support! It’s our honor to cover the oil & gas industry for you. We are taking the next two weeks off from the blog to celebrate the holidays but we’ll be back next year!
Mercer Capital has its finger on the pulse of the minerals market. The most recent Mineral Aggregator Valuation Multiples Study is now available.
This week, we explore the Q3 2024 earnings calls of Upstream and OFS companies, noting a focus on technological efficiency, optimized capital allocation, and expectations for natural gas demand in the long term. We examine some notable quotes from recent earnings call transcripts to gain insights into how industry leaders are navigating current challenges and positioning themselves for the future in an evolving energy landscape.
Buy-sell agreements don’t matter until they do. When written well and understood by all the parties, buy-sell agreements can minimize headaches when a company hits one of life’s inevitable potholes. But far too many are written poorly and/or misunderstood. Directors are always eager to discuss best practices for buy-sell agreements. In this week’s post, we talk to Chris Mercer, Mercer Capital’s founder and author of four books on buy-sell agreements, and ask, “Is there a ticking time bomb lurking in your business?”
This year’s National Association of Royalty Owners (NARO) National Convention was held in Houston and Mercer Capital’s Bryce Erickson, ASA, MRICS and David Smith, CFA, ASA had the privilege of attending. NARO has represented the interests of oil and gas royalty owners for over 40 years, seeking to support, advocate and educate for the empowerment of mineral and royalty owners. In addition to offering beneficial education opportunities, the event served as a valuable networking opportunity, connecting mineral and royalty owners with fellow owners as well as professional service providers specific to these assets. In this week’s post, we recap the event and provide valuable educational resources for our readers.
This year, Mercer Capital had the privilege of attending the 2024 D CEO Energy Awards, an event that celebrates the energy sector and honors leadership and companies from across the value chain that impact the Dallas-Fort Worth metroplex. In addition to celebrating individual accomplishments, the event served as a valuable networking opportunity, connecting energy leaders, innovators, and key industry players. In this week’s post, we recap the event and key award winners in the energy industry for our readers.
Mercer Capital is pleased to announce the release of the 2024 Energy Purchase Price Allocation Study. This study researches and observes publicly available purchase price allocation data from companies primarily contained in one of the four sub-sectors of the energy industry: (i) exploration & production; (ii) oilfield services; (iii) midstream; and (iv) downstream. This study is unlike any other in terms of energy industry specificity and depth.
The study provides a detailed analysis and overview of valuation and accounting trends in these sub-sectors of the energy space. It also enables key users and preparers of financial statements to better understand the asset mix, valuation methods, and useful life trends in the energy space as they pertain to business combinations under ASC 805 and GAAP fair value standards under ASC 820. We utilized transactions that reported their purchase allocation data in calendar year 2023 and not reported in previous annual filings.
The Haynesville/Bossier Shale was discovered in 2008 in East Texas and Western Louisiana. As a play, it differs from other reserves in that it is saturated with smaller independent operators compared to plays like the Eagle Ford and the Permian over the last decade. Despite its challenges, the current market indicates brighter days ahead for the Haynesville. We explore the latest trends in the basin in this week’s post.
The Q3 2024 issue of Mercer Capital’s Exploration and Production Newsletter focuses on the Appalachian basin. Appalachian production declined over the last twelve months due to reduced drilling activity, driven by low natural gas prices and high storage inventory. Consequently, Appalachian E&P stocks generally saw year-over-year price drops across the board. Despite recent setbacks, there is optimism for 2025.
In a year where natural gas prices have spent most of the year under $3.00, the stock prices of publicly traded Appalachian gas producers have remained remarkably stable. This could come across as surprising. Appalachia has some disadvantages to other US gas producing basins, such as takeaway capacity, logistics, and longer distances to major LNG production facilities. However, since 2022 the stock market has held steady for these companies; of which this confidence has outlasted commodity price and earnings declines over the past two years.
We are excited to share the release of Z. Christopher Mercer’s latest book, “Buy-Sell Agreements: Valuation Handbook for Attorneys” published by the American Bar Association. This week, we share an excerpt from the book and what you can expect to find in the full copy.
The economics of oil & gas production vary by region. Mercer Capital focuses on trends in the Eagle Ford, Permian, Haynesville, and Marcellus and Utica plays. The cost of producing oil and gas depends on the geological makeup of the reserve, depth of the reserve, and cost to transport the raw crude to market. We can observe different costs in different regions depending on these factors. In this post, we take a closer look at the Marcellus and Utica shales, specifically the Appalachian basin.
M&A activity among upstream participants in the Marcellus and Utica Shales has been sparse in recent years, with Shale Experts reporting only one transaction since November 2022. This week’s Energy Valuation Insights blog takes a break from deal multiples to observe the negotiations of the $7.4 billion merger between Chesapeake Energy Corp. (“Chesapeake”) and Southwestern Energy Co. (“Southwestern”), a significant player in the Marcellus Shale.
Mercer Capital has its finger on the pulse of the minerals market. The most recent Mineral Aggregator Valuation Multiples Study is now available.
This week, we explore the Q2 2024 earnings calls of Upstream and OFS companies, highlighting the significance of this quarter’s themes across the entire sector. The main themes discussed on these calls include strong international demand for U.S. oil and gas, domestic challenges from natural gas prices, and technological advances in drilling and operational efficiency. We unpack these trends in this week’s post.
The oil and gas industry is constantly changing, with a lot of moving parts and financial complexities. Accurate valuation of assets within this sector is critical for making informed strategic decisions. At Mercer Capital, we have cultivated a deep understanding of the oil and gas industry through decades of experience. To share our knowledge and insights, we have produced three complimentary whitepapers for our blog readers.
