Category

Energy Valuation Insights

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October 25, 2024 Special Topics

Now Available: Mercer Capital’s 2024 Energy Purchase Price Allocation Study

Mercer Capital is pleased to announce the release of the 2024 Energy Purchase Price Allocation Study. This study researches and observes publicly available purchase price allocation data from companies primarily contained in one of the four sub-sectors of the energy industry: (i) exploration & production; (ii) oilfield services; (iii) midstream; and (iv) 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 these sub-sectors of the energy space. It 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 reported their purchase allocation data in calendar year 2023 and not reported in previous annual filings.

October 18, 2024 Domestic Production Haynesville Shale Mergers, Acquisitions, & Divestitures

“Hayne” in There, Haynesville!

The Haynesville/Bossier Shale was discovered in 2008 in East Texas and Western Louisiana. As a play, it differs from other reserves in that it is saturated with smaller independent operators compared to plays like the Eagle Ford and the Permian over the last decade. Despite its challenges, the current market indicates brighter days ahead for the Haynesville. We explore the latest trends in the basin in this week’s post.

October 10, 2024 Mergers, Acquisitions, & Divestitures

Just Released: 3Q24 Exploration & Production Newsletter

The Q3 2024 issue of Mercer Capital’s Exploration and Production Newsletter focuses on the Appalachian basin. Appalachian production declined over the last twelve months due to reduced drilling activity, driven by low natural gas prices and high storage inventory. Consequently, Appalachian E&P stocks generally saw year-over-year price drops across the board. Despite recent setbacks, there is optimism for 2025.

October 4, 2024 Domestic Production Valuation Issues

Should Appalachian Natural Gas Producers’ Stock Price Resiliency Be Surprising?

In a year where natural gas prices have spent most of the year under $3.00, the stock prices of publicly traded Appalachian gas producers have remained remarkably stable. This could come across as surprising. Appalachia has some disadvantages to other US gas producing basins, such as takeaway capacity, logistics, and longer distances to major LNG production facilities. However, since 2022 the stock market has held steady for these companies; of which this confidence has outlasted commodity price and earnings declines over the past two years.

September 25, 2024 Special Topics Valuation Issues

New Book: “Buy-Sell Agreements: Valuation Handbook for Attorneys”

We are excited to share the release of Z. Christopher Mercer’s latest book, “Buy-Sell Agreements: Valuation Handbook for Attorneys” published by the American Bar Association. This week, we share an excerpt from the book and what you can expect to find in the full copy.

September 20, 2024 Domestic Production Marcellus and Utica Shale

Navigating Challenges in Appalachian Production

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

September 12, 2024 Marcellus and Utica Shale Mergers, Acquisitions, & Divestitures

Observing the Negotiations of the Chesapeake – Southwestern Merger

A Marcellus and Utica Shale M&A Update

M&A activity among upstream participants in the Marcellus and Utica Shales has been sparse in recent years, with Shale Experts reporting only one transaction since November 2022.  This week’s Energy Valuation Insights blog takes a break from deal multiples to observe the negotiations of the $7.4 billion merger between Chesapeake Energy Corp. (“Chesapeake”) and Southwestern Energy Co. (“Southwestern”), a significant player in the Marcellus Shale.

September 6, 2024 Mineral and Royalty Rights

Mineral Aggregator Valuation Multiples Study Released

With Market Data as of September 3, 2024

Mercer Capital has its finger on the pulse of the minerals market. The most recent Mineral Aggregator Valuation Multiples Study is now available.

August 23, 2024 Current Events Domestic Production

Themes from Q2 Earnings Calls

Upstream (E&P) and Oilfield Service (“OFS”) Companies

This week, we explore the Q2 2024 earnings calls of Upstream and OFS companies, highlighting the significance of this quarter’s themes across the entire sector. The main themes discussed on these calls include strong international demand for U.S. oil and gas, domestic challenges from natural gas prices, and technological advances in drilling and operational efficiency. We unpack these trends in this week’s post.

August 16, 2024 Valuation Issues

Unlocking Value in the Oil & Gas Industry

The oil and gas industry is constantly changing, with a lot of moving parts and financial complexities. Accurate valuation of assets within this sector is critical for making informed strategic decisions. At Mercer Capital, we have cultivated a deep understanding of the oil and gas industry through decades of experience. To share our knowledge and insights, we have produced three complimentary whitepapers for our blog readers.

August 9, 2024 Mineral and Royalty Rights Valuation Issues

What Does the Valuation Process Entail for an Oil and Gas Royalty Interest?

A lack of knowledge regarding the worth of a royalty interest could be very costly. This can manifest itself in a number of ways. A shrewd buyer may offer a bid far below the interest’s fair market value; opportunities for successful liquidity may be missed; or estate planning could be incorrectly implemented based on misunderstandings about value. Understanding how royalty interests are properly appraised will ensure that you maximize the value of your royalty, whenever and however you decide to transfer it.

August 2, 2024 Valuation Issues

What Does the Valuation Process Entail for an E&P Company?

A lack of knowledge regarding the value of your business could be very costly. Opportunities for successful liquidity may be missed or estate planning could be incorrectly implemented based on misunderstandings about value. In addition, understanding how exploration and production companies are valued may help you understand how to grow the value of your business and maximize your return when it comes time to sell.

July 26, 2024 Mergers, Acquisitions, & Divestitures Special Topics

Premiums for Inventory Scale

In the last year, M&A activity in the upstream area of the oil and gas industry has increasingly become top-heavy, characterized by several headline deals. While the broader North American E&P deal count has been shrinking since 2022, a handful of major acquisitions in the last year have led to a spike in upstream M&A spending. With fewer yet higher-dollar deals and producers eyeing to expand their portfolios of core acreage, the energy industry’s M&A market has greatly shifted in 2024.

July 19, 2024 Domestic Production

What’s “Play”-ing in the DJ Basin?

An Introduction to the Denver-Julesburg Basin

The Denver-Julesburg (“DJ”) Basin is a vast and geologically complex basin marked by sedimentary layering, tectonic shifts, and hydrocarbon generation. Encompassing an area of approximately 20,000 square miles, it stretches across regions of Colorado, Wyoming, Nebraska, and Kansas. From an economic standpoint, the DJ Basin has long contributed significantly to the U.S. energy sector. Data from the U.S. Energy Information Administration (“EIA”) reveals the DJ Basin was among the top five oil producers in 2023. In this week’s post we explore important production and players in the DJ Basin.

July 12, 2024 Mergers, Acquisitions, & Divestitures Permian Basin

Just Released | 2Q24 Exploration & Production Newsletter

REGION FOCUS: PERMIAN

The 2Q24 issue of Mercer Capital’s Exploration & Production newsletter focuses on the Permian. Permian production growth over the past year was a positive outlier among the four basins covered in our analysis, with Eagle Ford, Appalachia, and Haynesville all posting production declines (albeit Appalachia’s decline being insignificant at 0.3%). While showing typical reactions to global and national energy economic forces, commodity prices ended the period modestly improved. Rig count declines were greater than production declines, partly due to the continuation of the recent trend in DUC count declines.

In addition to our overview of the Permian, this newsletter also contains:

– Oil and Gas Commodity Price Update
– Macro Update
– Industry M&A Activity
– Public Company Performance
– Production Update
– Rig Counts

Download the newsletter to stay up to date on the industry.

June 28, 2024 Mergers, Acquisitions, & Divestitures

Acquisition Premiums Return to the Oil Patch

The shale industry is showing signs of maturity. Some acquisition trends appear to be burgeoning, such as acquisition premiums, more debt, and looser hedging requirements. These portend higher values and perhaps more of an emphasis on longer-term drilling inventory as opposed to nearer-term production metrics.

June 21, 2024 Permian Basin

Permian Production Growth Stands Alone

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

June 14, 2024 Current Events Mergers, Acquisitions, & Divestitures Permian Basin

Large Acquisitions Dominate the Permian M&A Landscape

Transaction activity in the Permian Basin declined over the past 12 months, with the transaction count decreasing 53% to nine deals, a decline from the 19 deals that occurred over the prior 12-month period. This level is also well below the 21 deals that occurred in the 12-month period ended mid-June 2022 and the 27 transactions that closed during the same time period in 2021. While the pace of M&A activity in the Permian has waned relative to prior years, deal size is making up for lower deal volume. But despite fewer “big game” targets remaining, the Permian Basin still offers resources to companies seeking to maintain high-quality reserve inventory.

June 6, 2024 Mineral and Royalty Rights

Mineral Aggregator Valuation Multiples Study Released

With Market Data as of June 3, 2024

Mercer Capital has its finger on the pulse of the minerals market. The most recent Mineral Aggregator Valuation Multiples Study is now available.

May 24, 2024 Current Events Domestic Production

Themes from Q1 Earnings Calls

Upstream (E&P) and Oilfield Service (“OFS”) Companies

In our prior earnings call post, Themes from Q4 2023 Earnings Calls, we touched on the global focus of both the Upstream and OFS segments and the persistent drive to optimize efficiency in well operations and services with technological advancements, durable inventory, and more. This week, we explore the Q1 2024 earnings calls of upstream and OFS companies, highlighting the appearance of this quarter’s themes across the entire sector: dividends and buybacks and a boost to the gas market.

May 17, 2024 Current Events Special Topics

Oilfield Water Industry Update, Trends, and the Future

The oilfield water industry (OFW, or midstream water) continues to grow in importance within the general upstream energy industry.  So much so that while historically considered part of the Oilfield Services Industry (OFS), midstream water is now considered its own industry within the upstream space, separate from the more general OFS.  In this week’s Energy Valuation Insights blog, we explore the current status, trends, and expectations for the future of midstream water.

May 10, 2024 Current Events Eagle Ford Shale Mergers, Acquisitions, & Divestitures

SilverBow’s Shareholder Brawl

It’s an election year, and the battle is on. SilverBow Resources, a publicly traded oil and gas company operating in South Texas’ Eagle Ford shale, is wrapped up in a big conflict with some of its own shareholders. Kimmeridge Energy Management, both a large shareholder and a rival operator in the Eagle Ford, has proposed a merger (which it, at least temporarily, withdrew last month), and now is proposing several new board members in a proxy battle. The primary question centers on the direction of SilverBow’s value enhancement strategy. However, it appears this strategy hinges, in part, on its debt position, and dividend policy. Management has one idea on how this should go; Kimmeridge clearly has another.

May 3, 2024 Current Events Domestic Production Special Topics

The Inside “SCOOP”

The SCOOP/STACK is a significant oil and gas play found in the Anadarko Basin of Oklahoma. Historically, the Anadarko Basin has been a prolific area for oil and gas extraction. It spans approximately 70,000 square miles across Western Oklahoma, the Texas Panhandle, and parts of Southwestern Kansas and Southeastern Colorado. The basin’s geology features some of the thickest and highest-quality shale reservoirs in the United States, making it an attractive site for drilling and production. Given that fact pattern, it might surprise some to learn that activity in the SCOOP/STACK has been sluggish, to say the least, in recent times.

April 26, 2024 Bakken Shale Mergers, Acquisitions, & Divestitures

The Beginning of a Bakken Behemoth

Chord Energy and Enerplus

In a significant development for the energy industry, on February 21, 2024, Chord Energy Corporation and Enerplus Corporation announced a definitive agreement to merge. This strategic combination aims to create a powerhouse in the Williston Basin, leveraging their complementary strengths and operational expertise. But acquisitions are not the only transactions happening in the Bakken. The University of North Dakota received substantial federal funding to investigate the potential of utilizing captured carbon dioxide to enhance oil recovery in the Bakken. As these narratives develop, only time will tell how both will shape the future of the area.