A weekly update on issues important to the oil and gas industry
After an extraordinarily challenging 2020, 2021 gave Oil & Gas companies some respite and (perhaps most importantly) some optimism going into 2022. As we enter the new year, we look back at to see what was popular with you – our readers. Here is a list of some of our top posts of 2021.
Did you miss Mercer Capital’s 2021 Energy Purchase Price Allocation Study? If you did, before we move into 2022, take a look at the 2021 Study. This study researches and observes publicly available purchase price allocation data for three sub-sectors of the energy industry: (i) exploration & production; (ii) oilfield services; and (iii) midstream and 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 each sub-sector. This study 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 closed and reported their purchase allocation data in calendar year 2020.
The economics of Oil & Gas production vary by region. Mercer Capital focuses on trends in the Eagle Ford, Permian, Bakken, and Marcellus and Utica plays. In this post, we take a closer look at the trends in the Marcellus and Utica.
M&A transaction activity in the Marcellus & Utica shrank in number in 2021 relative to 2020. However, the relatively greater magnitude of production density represented by the transactions in 2021 could prove to be a bellwether of more “transformational” transactions to come in 2022 as companies stake their claim in the gas and gas liquids-rich basins of Appalachia. In this week’s post we review M&A activity in 2021 including the EQT/Alta Resources and Northern Oil and Gas/Reliance transactions.
Mercer Capital has its finger on the pulse of the minerals market. An important trend has been the rise of mineral aggregators, which have largely supplanted the trusts as the primary method of publicly traded minerals ownership.
In this updated Study, Mercer Capital has thoughtfully analyzed the corporate and capital structures of the publicly traded mineral aggregators to derive meaningful indications of enterprise value. We have also calculated valuation multiples based on a variety of metrics, including distributions and reserves, as well as earnings and production on both a historical and forward-looking basis.
As commodity prices have risen and Q3 profit reports have rolled in, oil and gas companies have been accused of price gouging. This accusation isn’t true. They are tentative and reticent. Why? The answer is found somewhere among supply and demand dynamics, rising costs, and capital headwinds.
Themes in our Q2 mineral aggregator earnings calls digest included capital discipline by operators, expectations of a very favorable price environment, and increases in distributions to shareholders, resulting in an overall optimistic outlook for the sector. This week we focus on the key takeaways from the mineral aggregator Q3 2021 earnings calls which addressed anticipated acquisition activity, production expectations, and whether or not the sector remains optimistic about the future.
The Q3 earnings calls for E&P operators continued the theme from Q2 – an oil and gas industry reaching a relatively steady operational state, with efficiencies offsetting cost inflation and helping lead to growth in free cash flow despite the tumultuous past 18 to 24 months. In the Q3 earnings calls, maintaining capital discipline with flat or low growth in production volumes was a point of focus as was E&P operators’ possible approaches to fortify their value proposition to shareholders. Check out this week’s post for details.
Mercer Capital’s energy team sponsored and attended the D-CEO 2021 Energy Awards in Dallas earlier this week. It was a great event and a good opportunity to connect with clients, peers, and industry leaders in the energy space. Awards ranged from honoring top executives, including Scott Sheffield of Pioneer Energy, to private equity firm innovators like Pearl Energy Investments.
Thematically, the focus of this award dinner was the interdisciplinary threads between oil, natural gas, and renewables.
Natural gas prices are rising. So why is production not ramping up to meet heightened demand? Is the demand mostly coming from the U.S.? What are the ripple effects of higher natural gas prices? We tackle all this and more in this week’s post.
