On June 19, 2017, EQT announced the acquisition of Rice Energy (RICE) for approximately $6.7 billion. The result of this transaction is the potential creation of a Marcellus and Utica mega-producer. We take a closer look at the deal in this post and present our analysis.
Energy Valuation Insights
A weekly update on issues important to the Energy industry
When valuing mineral interests, it is important to consider the nuances of the each type of mineral interest. Given that risk and asset values are indirectly related, it is important to keep in mind the various risk factors which pertain to the mineral interest. We’ll begin by examining the various risks surrounding both types of interests.
Overriding royalty interests are often used as an incentive for those who are affiliated with the drilling process but do not own the minerals or E&P company (a broker or geologist for, example). Owners of ORRI, like royalty interest owners, bear no cost of production but own a portion of the revenues generated by the drilling process.
Oil and gas analysts use many different metrics to explain and compare the value of an oil and gas company, specifically an exploration and production (E&P) company. The most popular metrics (at least according to our eyeballs) include (1) EV/Production; (2) EV/Reserves; (3) EV/Acreage; and (4) EV/EBITDA(X). Enterprise Value (EV) may also be termed Market Value of Invested Capital (MVIC) and is calculated by the market capitalization of a public company plus debt on the balance sheet less cash on the balance sheet. In this post, we will dive into one of these four metrics, the EV/Production metric, and explore the most popular uses of it.
Since the start of the oil downturn, more than 120 upstream and oilfield service companies declared bankruptcy. However, as we described in a previous post, the decision to file for bankruptcy did not always signal the demise of the business. Now more prepared, many E&P companies who reorganized are looking to grow.
- 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