Category

Energy Valuation Insights

---

July 12, 2019 Permian Basin

Valuations In The Permian

Gearing Up For The Long Haul Or Running In Place?

When it comes to the oil patch, the word “growth” can be a vague term. It’s a word that can be masqueraded around to suit the perspective of whomever utters it. What does it mean in an industry whose principle resources are constantly in a state of decline? When it comes to the Permian Basin these days, growth applies to resources, drilling locations and production. Unfortunately, the same can’t be said for profits, free cash flow or new IPOs. Don’t misunderstand, the Permian is the king of U.S. oil plays and by some measures could be taking the crown as the biggest oil field in the world. However, various economic forces are keeping profits and valuations in check.

June 26, 2019 Special Topics

Q2 2019 Macro Overview

Uncertainties Engulf Global Oil Amid Political Tensions

Brent crude prices began the quarter around $69 per barrel and peaked at nearly $75 in late-April before declining to just below $60 on June 12th, 2019. Prices have since increased to $65, with WTI continuing to trail by about $8 per barrel. In this post, we will assess global supply and demand factors that have caused these price fluctuations.

June 18, 2019 Mergers, Acquisitions, & Divestitures 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.

June 10, 2019 Special Topics

Forecasting Future Operating Results for an Oilfield Services Company

In our prior two blog posts, we detailed the specifics of “what is” and “what are the characteristics of” an oilfield equipment/services company (“OFS”), and detailed the typical approaches and methodologies utilized in valuing OFS companies.  This week, we’ll address some of the special considerations that must be given attention in the appraisal of OFS companies.  Specifically, the challenges in forecasting the future operating results for an OFS company.

June 3, 2019 Special Topics

How to Value an Oilfield Services Company

When valuing a business, it is critical to understand the subject company’s position in the market, its operations, and its financial condition. A thorough understanding of the oil and gas industry and the role of oilfield service (“OFS”) companies is important in establishing a credible value for a business operating in the space. Our blog strives to strike a balance between current happenings in the oil and gas industry and the valuation impacts these events have on companies operating in the industry. After setting the scene for what an OFS company does and their role in the energy sector, this post gives a peek under the hood at considerations used in valuing an OFS company.

May 24, 2019 Special Topics

What is an Oilfield Service Company?

This week’s post is the first in a series related to oilfield service companies. In this first post, we describe what an oilfield service company is, their place in the broader industry, and their key drivers.

May 17, 2019 Mineral and Royalty Rights

Royalty and Mineral Value Proposition Highlights Otherwise Underperforming Energy Sector

The burgeoning mineral market is leading the way for an energy sector that has lagged in returns for several years now. For this week’s post, we highlight the ascension of the estimated $400 to $600 billion onshore mineral market in the U.S, a topic discussed last month at the DUG Permian Basin Conference in Fort Worth.

May 6, 2019 Mergers, Acquisitions, & Divestitures Special Topics

Brigham Minerals IPO Brings Spotlight to Oil & Gas Market

Mineral Aggregators are Leading the Forefront in an Underwhelming Energy Sector

In this post, we will review the continued IPOs and valuation implications for the mineral aggregators market as well as examine Brigham’s operations and placement in this sector.

April 30, 2019 Eagle Ford Shale

2019 Eagle Ford Shale Economics

Challenging For Valuation Title Belt

Will the Eagle Ford win the profitability fight with other basins? It may not have the scale or heft of the Permian, but its profitability punches are as strong as anyone’s.

April 19, 2019 Domestic Production Special Topics

An Overview of Salt Water Disposal

Over the last 12 years the oilfield waste water disposal industry has grown exponentially, both on an absolute basis, and by rank of its importance/size among the oilfield services. This growth has been largely driven by the increased volumes of waste water generated in the production of oil from shale plays. This post discusses the basics of salt water disposal that has become so important given the rise of hydraulic fracturing.

April 8, 2019 Mineral and Royalty Rights

Considerations for Endowments Divesting Fossil Fuels

The purpose of an endowment is to provide a permanent source of funding that maintains the operations of colleges, universities, churches, etc.  To best serve its fiduciaries, an endowment should achieve the highest return possible.  Congruently, when divesting, the endowment must ensure it achieved a fair price for its investments. This post does not weigh in on the discussion of whether endowments should or should not liquidate fossil fuels.  Rather, we hope to educate and advise those who have decided to divest their fossil fuel assets and are unsure of how to proceed.

April 3, 2019 Mineral and Royalty Rights

From Enduro to Permianville

A Closer Look at Permianville Royalty Trust

In previous posts, we have discussed the relationship between public royalty trusts and their market pricing implications to royalty owners. Many publicly traded trusts are restricted from acquiring other interests, so they have relatively fixed resources, and the value of these trusts comes from generally declining distributions. In many cases, the royalty comes from a related operator, though this is neither required nor characteristic of all trusts. There are also other MLPs such as Kimbell Royalty Partners, Viper Energy Partners, Dorchester Minerals, and Black Stone Minerals that are aggregators consistently gobbling up new acreage. In this post, we explore the subject characteristics of Permianville Royalty Trust, formerly known as Enduro Royalty Trust.

March 28, 2019 Eagle Ford Shale

O(i)l Faithful

Eagle Ford Region Overview

Nearly a quarter of the way through 2019, prices have rebounded somewhat after a tumultuous end to 2018.  First quarter energy prices again moved in opposite directions, with crude prices increasing steadily over the period while natural gas prices decreased from $2.94 to $2.80 per Mcf by mid-March despite peaking at over $3.50 in mid-January.

March 21, 2019 Eagle Ford Shale Mergers, Acquisitions, & Divestitures

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.

March 11, 2019 Valuation Issues

How to Value Your E&P Company

Our whitepaper “How to Value Your Exploration and Production Company” provides an informative overview of the valuation of exploration and production companies. Because of the historical popularity of this post, we revisit it this week. This post helps you, the reader, understand how E&P companies are valued which may help you understand how to grow the value of your business and maximize returns when it comes time to sell.

March 6, 2019 Special Topics

Supply Management: How The Market Is Handling Capital And Crude In 2019

Bryce Erickson recently attended the 2019 NAPE Expo in Houston, Texas. One of the repeated sentiments among several panelists was that valuations are currently attractive despite declining commodity prices and logistics constraints. If capital and resource supply are managed efficiently, it could align the strong upstream and midstream potential with cash flow reality.

February 26, 2019 Special Topics

Four Themes from Q4 2018 Earnings Calls

We Read the Earnings Calls so You Don’t Have to

Commodity prices exhibited significant volatility to end 2018 with steep declines in crude prices and a spike in natural gas prices that subsequently fell back.  The general market also declined over the period, making it difficult to parse reasons for various stock price gyrations.  While lower prices aren’t ideal for industry operators, earnings calls remind wary investors that there’s more to price than what trades on the NYMEX. Executives this quarter also note a shift in focus when it comes to capital outlays.

This week, we take a look at some of the earnings commentary of large players in the oil and gas space to gain further insight into the challenges and opportunities developing in the industry.

February 18, 2019 Special Topics

David Smith Joins Mercer Capital and Opens Houston Office

Mercer Capital is pleased to announce that J. David Smith, ASA, CFA has joined the firm and leads the firm’s Houston office.

February 15, 2019 Special Topics

Limited Partners, What Are Your Rights?

Legal Rights and Valuation Considerations For Your Limited Partner Interest

A partnership is a business owned by two or more individuals. In its most basic form, a partnership typically falls into one of three categories: a general partnership, a joint venture, or a limited partnership. While the specifics of these three types can vary depending on the goals of the business, they all share similar features. For the purposes of this post, we will be examining benefits and rights we have come across in performing valuations over various types of partnership structures and their relation to value.

February 5, 2019 Valuation Issues

Do The Upstream Sector’s Mosaic Of Indicators Create A Clear Picture?

There are several indicators out there that are sending mixed messages for valuations in the upstream sector. They create a visual of what is happening and what could happen going forward. This post looks at a few of these indicators to gain clarity.

January 28, 2019 Mineral and Royalty Rights Special Topics

Risk and Return

Working Interests and Royalty Interests

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.

January 22, 2019 Mineral and Royalty Rights

Mineral Interest Owners: How to Know What You Own

As we’ve discussed, there are plenty of factors to consider when determining the value of mineral interests. While some mineral owners may be very well attuned to decline curves and local pricing dynamics, others may only casually monitor the price of oil and gas to get a general sense of the trend in the industry.  This post is geared towards those mineral interest owners who have less knowledge on the subject and should serve as a guide for those looking to learn more about what they own.

January 17, 2019 Mergers, Acquisitions, & Divestitures

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.

January 11, 2019 Special Topics

Q4 2018 Review and Outlook for 2019

Q4 2018 was truly a dramatic quarter for the industry. It marked the end of the two and a half-year oil price recovery that began in 2016, while natural gas prices reached their highest point since 2014. With ongoing oversupply concerns, stabilizing geopolitical tensions, and lower forecasts for global oil demand, it appears in 2019 oil prices have a long way to recover to its previous high in 2018.