Category

Energy Valuation Insights

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July 22, 2020 Bankruptcy Current Events

Valuation Considerations in Bankruptcy Proceedings

An Overview for Oil & Gas Companies

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.

July 3, 2020 Permian Basin

Current Environment Challenges America’s Most Prolific Basin

Permian Basin Update

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.

June 24, 2020 Mergers, Acquisitions, & Divestitures 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.

June 22, 2020 Special Topics Valuation Issues

Impairment Testing of Oil & Gas Reserves

2020 Global Events Causing Significant Reserve Write-Downs

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.

June 18, 2020 Special Topics

Mercer Capital’s Mineral Aggregator Valuation Multiples Analysis

Market Data as of June 2, 2020

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.

June 16, 2020 Valuation Issues

Hedging And Bank Retreats Complicate Royalty Aggregators’ Valuation

As the clouds begin to clear from the oil patch storm that began three months ago, management, analysts and investors are wondering what is going to happen next. Has the proverbial storm system passed? Is it time to venture out and rebuild, or are we still in the eye of the hurricane, with the back wall on its way? Both are possibilities.

June 12, 2020 Special Topics

Themes from Q1 2020 Earnings Calls

Part 2: Mineral Aggregators

In this post, we examine some of the most discussed items and trends from the Q1 2020 earnings calls, specifically those in the mineral aggregator space.

June 5, 2020 Special Topics

Themes from Q1 2020 Earnings Calls

Part 1: E&P Companies

In this post, we examine some of the most discussed items and trends from E&P companies’ Q1 earnings calls.

May 28, 2020 Mineral and Royalty Rights Valuation Issues

Royalties And Minerals: A New Market Is Emerging

The fact that valuations in the mineral and royalty space have decreased is not news at this point, but what is interesting is that this environment has changed a lot of things along the way.

May 11, 2020 Bankruptcy Current Events

2020 Commodity Prices Upend 2019 E&P Bankruptcies

The recent historic decline in oil prices has strained the balance sheets of E&P companies.  Whiting Petroleum Corporation, the first publicly traded U.S. E&P company to declare bankruptcy in 2020, announced its Chapter 11 reorganization process on April 1.  More are expected to follow.

Despite a much more benign commodity price environment of ~$50-$60/bbl in 2019, a number of E&P companies declared bankruptcy last year and have seen their reorganization processes derailed in 2020 as a result of low oil prices.

April 28, 2020 Current Events Valuation Issues

Uncharted Valuation Territory: What Is A Barrel Or An Acre Worth Today?

Times are tumultuous for the oil and gas industry. News earlier this month was met with no rise in West Texas Intermediate pricing at the time. It hovered around $20.00 per barrel. Last week it fell to the seemingly unconscionable negative territory. It was worse in other places. In Western Canada heavy select oil was around $4.50 per barrel and dropped to $0 last week. It went negative as well. World demand for oil has dropped somewhere between 20% and 35% by some estimations, and excess supply has been building for weeks.

Something must give, and something will. While global supply and demand imbalance has the industry scrambling in unseen territory, how does this convert to what upstream companies and reserves are worth amid the situation? Is it a 1:1 price to value change ratio? Depending on perspective, the answer is both simple and complicated.

April 14, 2020 Special Topics Uncategorized

Saudi Arabia, Russia, or the United States – Did One of the Players Blink?

It’s been a truly dizzying time in the rough-n-tumble world of oil production.  Like they say, if you miss a day, you miss a lot.  For now, it at least appears that someone may have just blinked.  The Trump administration seems to be on the verge of a truly historic deal to cut worldwide oil production and bring oil prices up to a modestly workable level.  And that with the U.S. not committing to forcing domestic producers to cut production levels but indicating that U.S. production would “naturally” decline without the government’s intervention. That coupled with a potential side-deal with Mexico to “cover” part of the production decrease that was being sought from that country, but that Mexico is unwilling to shoulder on its own. Will it work?  Will the deal be accomplished? Although an agreement was reached to reduce oil production in light of demand destruction caused by the coronavirus pandemic, oil markets appear to remain oversupplied.  Will OPEC+ and other nations agree to another deal to further reduce production?  Will U.S. production decline faster than anticipated due to low oil prices? Will the Texas Railroad Commission implement proration orders for Texas producers? All we can say is, stay tuned – and expect the unexpected.

April 6, 2020 Current Events Special Topics

1st Quarter 2020 Oil & Gas Industry Overview

In this post we examine the macroeconomic factors that have affected prices in this first quarter.

March 27, 2020 Eagle Ford Shale

Eagle Ford Update

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.

March 19, 2020 Eagle Ford Shale Mergers, Acquisitions, & Divestitures

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.

March 17, 2020 Bankruptcy Valuation Issues

Energy Valuations: Freefall Into Bankruptcy Or Is This Time Different?

Energy valuations are taking an epic pummeling. Considering declining demand amid COVID-19 concerns, the initial fallout to the Saudi-Russia feud was predictable. Can Banks Hold On? Can Values Recover?

March 12, 2020 Bankruptcy Special Topics

Current Commodity Price Environment May Lead to Next Round of OFS Bankruptcies

This week we discuss how commodity prices and recent events have impacted the Oil Field Services Industry, and what to expect going forward.

March 5, 2020 Special Topics

Themes from Q4 Earnings Calls

In this post, we examine some of the most discussed items and trends from the Q4 earnings calls, specifically E&P companies and those in the mineral aggregator space.

February 28, 2020 Special Topics

Mercer Capital’s 2019 Energy Purchase Price Allocation Study

Have you downloaded Mercer Capital’s 2019 Energy Purchase Price Allocation Study yet? The study provides a detailed analysis and overview of valuation and accounting trends in these subsectors of the energy space.  It enables key users and preparers of financial … Continued

February 20, 2020 Domestic Production Special Topics

An Overview of Salt Water Disposal

Part 3 | Valuation Considerations

Our previous posts on salt water disposal provided an overview of the sector and detailed the economics of the industry. In this post, we take a deeper dive into specific considerations that are critical to understanding the value of salt water disposal companies.

February 13, 2020 Valuation Issues

Understanding Oilfield Services Companies & How to Value Them

New Whitepaper

Understanding the value of an oilfield services (OFS) company is by its very nature a complex matter. In this post we discuss our latest whitepaper, Understanding Oilfield Services Companies & How to Value Them.

February 6, 2020 Mineral and Royalty Rights

Aggregators Continue to Attract Equity Capital

In this post, we focus on mineral aggregators. We also offer insights on the investment landscape at large and particularly as it relates to the minerals subspace by providing an update on the most recent IPO, Brigham Minerals (MNRL).

January 31, 2020 Special Topics

Exploration & Production Purchase Price Allocations

A Review of E&P Transactions Analyzed in Mercer Capital’s 2019 Energy Purchase Price Allocation Study

Last week, Mercer Capital released its 2019 Energy Purchase Price Allocation Study. In this post, we’ll be taking a deeper dive into the Exploration & Production transactions reviewed in the analysis.

January 22, 2020 Special Topics

Coming Soon: Mercer Capital’s 2019 Energy Purchase Price Allocation Study

We at Mercer Capital love movies.  One fun aspect of a movie is the anticipation for new releases that comes from watching movie trailers, which inform and tease simultaneously.  If done well, they can build anticipation for the show to come.  While not quite a movie trailer, we wanted to introduce you to a new study from our energy team that we are excited about: Mercer Capital’s Energy Purchase Price Allocation Study.