The movement in the future spread away from a contango environment and toward backwardation is positive from a supply and demand perspective. Expectations are a backwardation environment will move crude oil prices higher. However, the exact cause of this change is unknown. While this shift is good news for the industry, company specific risk and investor’s fickle attitudes create volatile equity markets.
Energy Valuation Insights
A weekly update on issues important to the Energy industry
There are many reasons that you may want to sell your oil and gas royalty interest, but a lack of knowledge regarding the worth of your royalty interest could be very costly. Whether an inflow of cash would help you make ends meet or finance a large purchase; you no longer want to deal with the administrative paperwork or accounting cost of reconciling monthly revenue payments; or you would prefer to diversify your portfolio or move your investments to a less volatile industry, understanding how royalty interests are valued will ensure that you maximize the value.
Travis W. Harms, senior vice president of Mercer Capital, wrote a series of whitepapers that focused on demystifying corporate finance for board members and shareholders. In this whitepaper, he has distilled the fundamental principles of corporate finance into an accessible and non-technical primer. Structured around the three key decisions of capital structure, capital budgeting, and dividend policy, this whitepaper is designed to assist directors and shareholders without a finance background to make relevant and meaningful contributions to the most consequential financial decisions all companies must make. Mercer Capital’s goal with this whitepaper is to give directors and shareholders a vocabulary and conceptual framework for thinking about strategic corporate finance decisions, allowing them to bring their perspectives and expertise to the discussion.
You don’t need an expert to tell you that the oil and gas industry has significantly changed over the past three years. Simply looking at crude oil and natural gas prices from 2014 versus today can confirm this. However, understanding how the change in oil prices has affected the value of your oil and gas business is a little more difficult.
In case you missed it, this week are rerunning a consistently popular post.
Oil and gas assets represent the majority of value of an E&P company. The Oil and Gas Financial Journal describes reserves as “a measurable value of a company’s worth and a basic measure of its life span.” Thus, understanding the fair market value of a company’s PDP, PDNP, and PUDs is key to understanding the fair market value of the Company.
- Asset Sales
- Bakken Shale
- Domestic Production
- Downstream Analysis
- Eagle Ford Shale
- Marcellus and Utica Shale
- Mergers and Acquisitions
- Permian Basin
- Royalty Trusts
- Special Topics
- Valuation Issues