Energy Valuation Insights

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

Category

Mergers, Acquisitions, & Divestitures


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.

Parsley’s Acquisition of Jagged Peak Highlights Key Consolidation Trends

On October 14, 2019, Parsley (PE) announced that it was acquiring Jagged Peak (JAG) in an all-stock transaction valued at $2.27 billion.  The market’s reaction to the announcement was generally negative, as Parsley closed down more than 10% on the date of the announcement.  This appears to be driven, at least in part, by investors’ desire for Parsley to be acquired rather than be the acquirer. Despite the negative market reaction, we believe this transaction is emblematic of key trends we expect to see during the next wave of consolidation.

Comstock’s Acquisition of Covey Park

A Valuation Analysis of the Multibillion-Dollar Haynesville Deal

On July 16, 2019, Comstock Resources, Inc (NYSE: CRK) finalized its acquisition of Haynesville operator Covey Park Energy LLC. Announced on June 10, 2019, the companies entered into an agreement under which Comstock would acquire Covey Park in a cash and stock transaction valued at approximately $2.2 billion, including assumption of Covey Park’s outstanding debt and retirement of Covey Park’s existing preferred units (totaling approximately $1.1 billion).

For the purposes of this post, we will be examining this deal from a few different vantage points and reviewing the fair value of the various components that make up total deal value. We’ll also look at how this transaction compares to industry valuation metrics and what kind of strategic advantages Comstock may have a result of the deal.

Permian Basin

M&A in the Permian

Big Deals and Bigger Opportunities

Operators in the Permian Basin have had to pay a premium to access the black gold mine, and companies are still lining up for a chance to get in on the action. While the industry as a whole has been moving into a period of rapid consolidation, a substantial portion of this acquisitive activity has been in the Permian.

Targets with highly contiguous holdings and acreage have been of particular note to acquirers in the Permian. While acreage continuity has not always been the most important aspect of a potential deal, it has certainly become more of a focal point recently.

Eagle Ford Shale

M&A in the Eagle Ford Shale

Over the last twelve months, the Eagle Ford Shale region has experienced steady growth and healthy transaction activity. The region’s strengths, such as its low cycle times, high oil cuts and Louisiana Light Sweet crude and Brent oil pricing, has facilitated free cash flow and made the area attractive to both investors and operators.

Oilfield Services in 2018

A Year in Review

Companies in the energy sector and the broader market experienced an interesting year showing steady and strong growth in Q1-Q3 and met volatility in Q4, which effectively erased gains on the year and even resulted in negative returns. The oilfield services (OFS) sector, in particular, was impacted heavily during last quarter’s downturn driven primarily by fears of oversupply in the market and E&P companies cutting back and looking for discounts.

BP & Diamondback Mergers Set Q3 Tone For Upstream Producers

Upstream producers’ stock performance has been volatile, infrastructure issues are lurking and the industry ended the quarter a notch above flat. However, the strategic acquisitions by BP and Diamondback Energy highlight the segment’s continued optimism.

Bakken Shale

M&A in the Bakken

Under the Radar

Over the past year, followers of the oil and gas industry have taken note of the multitude of transactions occurring in the Permian Basin with large deal values and hefty multiples. But the price differential between WTI and other benchmarks has grown over the last few months, and some attention has moved from the Permian to other domestic shale plays. The activity in other regions such as the Bakken was at one point slow (when compared to the Permian) causing the recent increase in production and the swapping of acreage to fly under the radar while many were focused on Texas.

M&A Activity in the Oilfield Service Sector

From Surviving to Thriving

The oilfield service sector has recovered significantly since the crash in oil prices in mid-2014. As capex budgets have expanded, especially in the Permian Basin, demand for oilfield services such as drilling and pumping has increased. But what does this mean for transaction activity in the sector?

EQT’s Acquisition of RICE Energy

Our Valuation Analysis of This Marcellus and Utica Mega Deal

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.

Special Topics

Eureka! Observations & Thoughts from the Permian DUG Conference

Last week, Mercer Capital attended the DUG Permian Basin Conference in Fort Worth. It was a solidly attended event hosted by Hart Energy. The session speakers were a mix of mostly company executives and industry analysts. The presentations were tinged with a lot of optimism – centered on the positive and unique economics of the Permian, tempered by (some) cautionary commentary. We will follow on in later posts with some more detail on specifics, but today we want to touch on a few thematic elements: the Permian was the center of the M&A activity in 2016 and will be in 2017, efficiency and productivity gains are helping to fuel activity, and a rise in rig counts will eventually mean rise in costs.

Noble Energy Buys Clayton Williams: A Closer Look at the Acquisition

On January 16, 2017, Noble Energy, Inc. announced the acquisition of all Clayton Williams Energy equity for approximately $2.7 billion in NBL stock and cash. Noble Energy is a global independent oil and gas exploration and production company. Their acquisition of CWEI demonstrates an effort to accelerate high margin growth by focusing capital in productive regions such as the Permian Basin.

Bakken Shale Eagle Ford Shale Permian Basin

2016 M&A Overview

As oil and gas prices remained low, deal volume picked up in the beginning of 2016 as companies were forced to sell assets in order to quickly generate cash to pay off debt and avoid bankruptcy. As the year continued, M&A activity increased and total deal value at the end of 2016 doubled that of 2015.

Bankruptcy Domestic Production Permian Basin

2016 Oil and Gas: A Year in Review

2016 was a year to remember and a year to forget for many in the oil and gas industry. On the positive side, energy commodity prices curbed their downward, volatile nature by finishing the year at higher prices than where they started. In this post, we survey how the industry ended the year from production and supply to bankruptcies and transactions as we look to 2017.

Permian Basin

M&A in the Permian: The Trend Continues

M&A activity reinforces that E&P companies are moving to the Permian. In this post, we focus on two transactions: Resolute Energy’s acquisition of Delaware Basin Acreage and Apollo and Post Oak Energy’s merger to form Double Eagle Energy Permian.

Permian Basin

M&A Overview: Race to the Permian

M&A activity in the exploration and production industry has recovered from the standstill experienced one year ago as oil and gas companies waited to see what the market would throw at them next. Companies, who cut drilling activity when prices collapsed, are now looking to replace their reserves through acquisitions, the majority of which are occurring in the Permian.

Valuation Issues

EOG/Yates Merger

A Closer Look at the Acquisition

On September 6, 2016 EOG Resources (EOG) announced the acquisition of Yates Petroleum (Yates) for approximately $2.4 billion dollars, by our calculations. In this post, we take a closer look at the deal.

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