As we hope for a better 2021, we look back at 2020 to see what was popular with you – our readers. This post includes a list of some of our top posts of 2020.
As we hope for a better 2021, we look back at 2020 to see what was popular with you – our readers. This post includes a list of some of our top posts of 2020.
A reserve report is a fascinating disclosure of information. This is, in part, because the disclosures reveal the strategies and financial confidence an E&P company believes about itself in the near future. Strategies include capital budgeting decisions, future investment decisions, and cash flow expectations. In this post, we provide a general overview of a reserve report, detailing why they’re important, what they contain, and how they’re prepared.
Oil and gas analysts use many different metrics to explain and compare the value of an oil and gas company, specifically an exploration and production (E&P) company. The most popular metrics (at least according to our eyeballs) include (1) EV/Production; (2) EV/Reserves; (3) EV/Acreage; and (4) EV/EBITDA(X). Enterprise Value (EV) may also be termed Market Value of Invested Capital (MVIC) and is calculated by the market capitalization of a public company plus debt on the balance sheet less cash on the balance sheet. In this post, we will dive into one of these four metrics, the EV/Production metric, and explore the most popular uses of it.
Last week, we reviewed the third quarter earnings calls for a select group of E&P companies and briefly discussed the macroeconomic factors affecting the oil and gas industry. In this post, we focus on the key takeaways from mineral aggregator third quarter 2020 earnings calls.
In this post, we capture the key takeaways from E&P operator third quarter 2020 earnings calls.
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. Check out our report in this post.
With the rise of corporate bankruptcies, some leveraged transactions that occurred pre-COVID are going to be scrutinized. This post considers solvency opinions conceptually including four questions every solvency opinion addresses.
In this post, we discuss each candidate’s political platform for the oil and gas industry. The major topics and issues at stake include domestic production, infrastructure plans, OPEC+ engagements, and international sanctions.
Projections and reorganization valuations of some recent oil and gas debtors demonstrate that creditors are aiming to ride existing production out of bankruptcy as opposed to drilling their way out of it.
In this post, we explore some of the many factors that play into making it more (or less) likely that an oilfield service participant will survive an industry downturn intact, or succumb to market pressures and enter into bankruptcy.
In this post, we will examine the macroeconomic factors that have affected the industry in the third quarter and peek behind the curtain on what the remainder of the year might hold.
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. In this post, we take a closer look at the Bakken.
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.
The oil & gas industry experienced a volatile path to price stability as COVID-19 and the Saudi-Russia price war took a toll on supply and demand. The road to recovery was apparent late in the quarter and was driven by supply cuts from OPEC+, curtailments by U.S. producers, and an increase in demand. In this post, we capture the key takeaways from E&P operator second quarter 2020 earnings calls.
This year has beaten down America’s oil producers. It started bad, with the Russian-Saudi battle for market share, then cascaded into terrible as the COVID pandemic gutted petroleum demand and sent oil prices down to an unheard of -$38 (negative!) per barrel. Those with the weakest hands have taken shelter in bankruptcy court, where it has been a busy six months.
The oil & gas industry experienced a volatile path to price stability as COVID-19 and the Saudi-Russia price war took a toll on supply and demand. The road to recovery was apparent late in the quarter and was driven by supply cuts from OPEC+, curtailments by U.S. producers, and an increase in demand. Mercer Capital has aimed to focus on the mineral aggregator space, most recently with the release of the second quarter mineral aggregator valuation multiples analysis. In this post, we capture the key takeaways from mineral aggregator second quarter 2020 earnings calls.
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 shown in the report, mineral aggregators’ stock prices have declined substantially over the past twelve months, but have rebounded from lows seen earlier in the year.
This week on the blog we feature our quarterly newsletter, which focuses on the Permian Basin. Notable items include an unprecedented decline in oil prices, the Texas Railroad Commission’s proration discussions, and Pure Acquisition Corporation’s announced acquisition of HighPeak Energy.
Due to the precipitous drop in oil prices in 2020, oil E&P companies in the U.S. have struggled to pay their debts, and in many cases already have had to file for bankruptcy. In this post, we re-examine how option pricing, a sophisticated valuation technique, can be used to understand the future potential of the assets most affected by low prices, PUDs and unproven reserves. Whether companies are looking to sell these reserves to improve their cash balance, or are trying to generate reorganization cash flow projections during a Chapter 11 restructuring, understanding how to value PUDs and unproven reserves is crucial to survival in a down market.
For oil & gas companies, the decision to file for bankruptcy does not necessarily signal the demise of the business. If executed properly, Chapter 11 reorganization affords a financially distressed or insolvent company an opportunity to restructure its liabilities and emerge from the proceedings as a viable going concern. Although the Chapter 11 process can seem burdensome, a rigorous assessment of cash flows, and a company’s capital structure can help the company as it develops a plan for years of future success. The purpose of this post is to provide an explanation of the key valuation-related steps of a Chapter 11 restructuring and help managers realize this potential.
While commodity prices have recovered from recent lows, they remain below levels at which certain E&P companies can operate sustainably. Two Permian operators have filed for bankruptcy, and more are likely coming. However, the Permian’s economics remain superior relative to most basins.
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.
The oil & gas market and the energy sector as a whole have taken a beating and experienced unprecedented events due to the global impacts from the pandemic and international price wars. While the scale of the full economic effects from these events has yet to be seen, companies are having to question and consider the need for interim impairment testing on reserves. The purpose of this post is to help oil & gas companies discern whether they may need to make interim impairment assessments and to discuss the impairment testing process.
Mercer Capital has its finger on the pulse of the minerals market. We have 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. Download our analysis here.
