Energy Valuation Insights

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


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.

Mergers, Acquisitions, & Divestitures

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.

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.

Mergers, Acquisitions, & Divestitures

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.

Growing Pains Curb Valuation Gains in the Permian

2Q18 Review

The story of the Permian Basin in 2018 so far has been developing as one of the finest proverbial “fishing holes” in the world.  However, as the year has progressed, it appears many industry players have found their reputed “catch” too big to process and are scrambling to deal with it before it begins to stink.

Translation: the year began with a flurry of developmental drilling activity followed by an emerging bottleneck.  The unintended consequence of this has been that some operators have been growing oil production too fast for pipeline and infrastructure to keep up.  A pricing differential has arisen due to the supply glut and there has been concurrent stagnation in valuations.  In this post, we discuss how some of it has transpired through the timeline of the first half of 2018.

Take What You Can and Get Out

When oil prices crashed in mid-2014, companies were forced to become more efficient in order to survive. It became clear that location meant more than ever and companies could no longer justify operating in regions such as the Bakken and the Eagle Ford, where break-even prices were higher than they were in the Permian.  Thus in order to stay in business, companies flocked to the Permian.  This week, we look at how the increased appeal of the Permian Basin has affected M&A activity in the oil and gas sector.

Piping Hot Permian

Production in the Permian is as hot as the summers in West Texas. Despite being discovered in the 1920s, it was not until 2007 that the region’s true potential was realized when hydraulic fracturing techniques were used to access the play’s tight sand layers. Given its low-cost economics and large well potential, in recent years, the Permian has been in the limelight with operators and investors alike prioritizing the region.

In this post, we discuss the increase of rig counts and production in the region, along with valuation implications for companies operating in the Permian.

Marcellus and Utica Shale

The Permian Boom Causing a Natural Gas Bust

The oil industry is cruising. Producers are flocking to many oil rich plays, most notably the Permian Basin, Bakken, and Eagle Ford. Producers in these areas are all looking to exploit multi-zone payouts and gain significant efficiencies with new deep lateral and horizontal wells. While this strategy is working very well for oil producers, often lost in the oil excitement is the byproduct, additional dry and natural gas liquids. For producers targeting natural gas, this is not good news.

The Permian Basin: Loaves and Fishes

One of the most commonly taught Bible stories is the miracle of Jesus feeding five thousand people with only five loaves of bread and two fish. Last week we learned of a new miracle story of never ending sustenance. The Permian Basin, which has been drilled since the 1920s and produced billions of barrels of oil, was discovered to hold the largest unconventional crude accumulation in the US.

Quick Facts: Permian Basin

Over the past few weeks, we have discussed the increase in M&A activity in the Permian and looked at specific characteristics that make the Permian attractive in a low price environment. Today, we take a step back and review the broad characteristics of the Permian Basin.

Mergers, Acquisitions, & Divestitures

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.

Captain Obvious: Location is Key in E&P

Deal activity, while quiet in the first quarter of the year, has picked up significantly in the last four months, especially in the Permian Basin. Pioneer has been one of the more active companies making investments in the play, but why would they in such a bleak energy climate?

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