Energy Valuation Insights

A weekly update on issues important to the oil and gas industry


Mergers, Acquisitions, & Divestitures

Special Topics

Is TXO’s Strategy Paying Off?

The TXO Energy Partners IPO

Amidst the current uncertainty in the upstream world, the case of TXO Energy Partners LP’s recent IPO provides valuable insights into investor behavior. TXO’s focus on optimizing existing wells, maintaining a conservative balance sheet, and a commitment to regular cash distributions are attracting investors seeking stability amidst unpredictable market conditions. We explore TXO’s story and what this might mean for the future of the upstream sector.

Domestic Production Special Topics

Earnings Stability and Geopolitical Volatility

Two Foes Are Battling Once More

In the mire of much of the chaotic goings on of the world energy markets and Ukraine over the past year, a lot of things have changed. Uncertainty has ruled the day. Commodity prices have now dropped significantly in the last six months. Yet, between the lines, there is optimism for the upstream industry as profitability and cash flows remain, and the possibility for acquisition premiums for target companies re-emerges in 2023.

Marcellus and Utica Shale

M&A in Marcellus & Utica Basins

Shareholder Value Creation Abounds; ESG Interest Waning

M&A transaction activity in the Marcellus & Utica shales increased in 2022 relative to 2021, with large industry players motivated by free cash flow growth and creating shareholder value and less motivated by championing the ESG cause. In this week’s post, we examine the two largest transactions that occurred in but were not limited to the Marcellus and Utica shales in 2022.

Bakken Shale

Bakken M&A

Increased Transaction Volume Continues into 2022

M&A transaction activity in the Bakken increased through year-to-date 2022 relative to the same time period in 2021 and consisted of a handful of large deals and numerous small deals. In this post, we discuss Bakken transaction activity as a whole and also dive deeper into the two largest Bakken transactions made this year.

Permian Basin

M&A in the Permian: Acquisitions Slow as Valuations Grow

Transaction activity in the Permian Basin cooled off this past year, with the transaction count decreasing to 21 deals over the past 12 months, a decline of 6 transactions, or 22%, from the 27 deals that occurred over the prior 12-month period.  This level is in line with the 22 transactions that occurred in the 12-month period ended mid June 2020. Read more in this week’s post.

Eagle Ford Shale

Eagle Ford M&A

Transaction Activity Over the Past 4 Quarters

M&A activity in the Eagle Ford has picked up over the past year in terms of both deal count and the amount of acreage involved. The 10 deals noted over the past year were split evenly between property/asset acquisitions and corporate transactions, such as the Desert Peak Minerals-Falcon Minerals Corporation merger announced in mid-January of this year. This signals a notable increase in corporate-level activity as only one of the eight transactions in the prior year involved a corporate transaction, possibly foreshadowing greater industry consolidation in the Eagle Ford moving forward. Read more in this week’s post.

Special Topics

Desert Peak to Go Public via Merger With Falcon After IPO Attempt

Desert Peak Minerals and Falcon Minerals Corporation recently announced an all-stock merger, forming a pro form a ~$1.9 billion mineral aggregator company.  This comes in the wake of Desert Peak’s attempted IPO in late 2021.  In this post, we look at the transaction terms and rationale, the implied valuation for Desert Peak, and implications for the mineral/royalties space.

Marcellus and Utica Shale Special Topics

M&A in Marcellus & Utica Basins

Activity in 2021 Was Muted Relative to 2020

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.

Special Topics

Chesapeake Finds Vine Ripe for the Picking

In August, Chesapeake Energy Corporation announced that it would acquire Vine Energy Inc. in a stock-and-cash transaction valued at approximately $2.2 billion. We previously discussed Vine’s IPO, which was the first upstream (non-minerals, non-SPAC) initial public offering since Berry Petroleum’s debut in mid-2017. 

Vine’s decision to be acquired in a ~0% premium transaction less than five months after its IPO speaks to the difficulty for E&P companies to manage public market dynamics even in a much-improved commodity price environment. 

In this post, we dig into the transaction rationale, look at relative value measures, and analyze how this transaction seems to indicate a shift in Chesapeake’s strategy.

Bakken Shale

Bakken M&A

Transaction Volume and Deal Size Rebound in 2021

Over the last year, deal activity in the Bakken has been steadily increasing after a challenging 2020.  Eight of the nine deals, in the last twelve months, occurred in the last eight months as the price environment has turned more favorable.  As the industry seems optimistic that the worst of COVID-19 is behind us, deal activity may continue to increase into next year, but there is always hesitation, especially with the Delta variant on the rise.

Permian Basin Special Topics

Pioneer Natural Resources Pay to Play

A Tale of Two Transactions

M&A transactions picked up in the 12-months ended mid-June relative to the 12-month period preceding it. Among all the transactions that occurred over this period, one pair jumped out involving a common buyer and for which valuation metrics were available. These related to Pioneer’s acquisition of Parsley Energy in October 2020 and DoublePoint Energy in April 2021. In this post, we take a deeper dive into each transaction.

Eagle Ford Shale Special Topics

Recent SPAC Boom Largely Leaves Out Oil & Gas Companies

The rise of SPACs, or special purpose acquisition companies, has been the hottest trend in capital markets during the past year.

In this blog, we take a look at a few oil & gas companies that were early adopters of the SPAC structure, review the recent pivot of SPACs towards energy transition companies, and see what the future might hold for the few remaining oil & gas-focused SPACs.

M&A Focus: The Pioneer-DoublePoint Deal

After what felt like an eternity of quiet transaction activity in the O&G industry, the M&A market in 2021 has been off to a more active start in 2021. In this post, we discuss the Pioneer-DoublePoint transaction that could foreshadow for more M&A activity to come.


Solvency Opinions: Oil & Gas Considerations

Regardless of whether a company files for Chapter 11, is party to an M&A transaction, or executes some other form of capital restructuring–such as new equity funding rounds or dividend recaps–one fundamental question takes center stage. Will the company remain solvent? This week we discuss the four tests that are used by professionals when performing a solvency opinion, and questions to consider for oil and gas companies.

Eagle Ford Shale

Eagle Ford Benefits From Commodity Price Increases Despite Challenges

The economics of oil and gas production vary by region. Mercer Capital focuses on trends in the Eagle Ford, Permian, Bakken, and Marcellus and Utica plays. The cost of producing oil and gas depends on the geological makeup of the reserve, depth of reserve, and cost to transport the raw crude to market. We can observe different costs in different regions depending on these factors. This quarter we take a closer look at the Eagle Ford.

Eagle Ford Shale Special Topics

Eagle Ford M&A

Transaction Activity Slows Amid Challenges of 2020

M&A transaction activity in the Eagle Ford was fairly quiet throughout 2020 before Chevron’s $13 billion deal with Noble Energy.  The Chevron-Noble Energy transaction and the Ovintiv-Validus deal could be foreshadowing a busier M&A market in 2021.

Special Topics

What Is a Fairness Opinion And What Triggers the Need for One?

Irrespective of what industry or sector a company may operate in, a fundamental question arises as mergers and acquisitions persist and company boards and management teams survey their options when a proposed transaction is put on the table: is it fair to all direct stakeholders? This post reviews the basics of fairness opinions and when you should obtain one.

Bakken Shale COVID-19 Coverage

M&A in the Bakken

Immense Drop in Deal Activity Due to COVID Concerns

Over the past several years, the Bakken has generally had much lighter acquisition and divestiture activity than other major basins in the United States.  Given that deal activity across the energy sector has dropped an immense 42.7% over the past year, acquisition and divestiture activity has dropped even further in this basin over the past year. Observed deal activity has largely been the result of Northern Oil and Gas growing its production base in the area during the past several years.

Permian Basin

M&A in the Permian Basin

The Road Ahead: Deal Count and Deal Motives Changing in Challenging Times

Transaction activity in the Permian Basin is in a unique and potentially critical situation as companies are facing unpredictable consequences and uncertain futures. Only four deals have been announced post-March and while the sample is small, they could be the best indication of what is to come, assuming prices remain depressed.

Eagle Ford Shale

Eagle Ford M&A

Steady Transaction Activity Restrained by Unforeseeable Circumstances

Over the last year, deal activity in the Eagle Ford Shale was relatively steady, picking up towards the end of 2019 and carrying into early 2020. This week we discuss recent transactions in the Eagle Ford.

Appalachia M&A

Rangebound Gas Prices and Preoccupied Management Teams Cause Slowdown in Activity

It was a quiet year for M&A in Appalachia as only a handful of transactions occurred.  Surging associated gas production in places like the Permian and Bakken have kept a lid on gas prices, which have largely remained between $2 and $3/mmbtu for the year.  Near term expectations aren’t much better, with futures prices below $3 through 2029.  Management teams were likely preoccupied with various corporate and capital structure issues instead of changes to the underlying reserve base.  However, a bright spot is the easing of takeaway constraints that previously plagued the region.

Oil & Gas

Mercer Capital provides oil and gas companies, oil and gas servicers, and mineral & royalty owners with corporate valuation, asset valuation, litigation support, transaction advisory, and related services