Energy Valuation Insights

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


Special Topics

Mergers, Acquisitions, & Divestitures

Themes from Q3 Earnings Calls

Part 2: Oilfield Service (“OFS”) Companies

Key themes we saw in Q3 earnings calls for oilfield service (“OFS”) companies were a rebound in activity, increased M&A in the space, and a focus on capital returns. Operators agree on a positive outlook for 2024, driven by factors like healthy commodity prices and global demand. As the industry evolves and OFS operators continue to make strategic shifts, we’ll keep you updated on future changes.

Themes from Q3 Earnings Calls

Part 1: Upstream

This week, we look at earnings calls in the upstream sector for Q3 2023. The past quarter saw significant M&A activity, like Exxon Mobil’s acquisition of Pioneer Natural Resources, which emphasizes efficiency and inventory expansion. As domestic operators are increasing production to meet demand, the industry expects a favorable environment going into 2024.

D CEO’s 2023 Energy Awards

Mercer Capital recently attended D CEO’s 2023 Energy Awards, an event that recognizes significant contributions to the energy sector in the Dallas Fort Worth area, including both traditional and renewable energy achievements. The ceremony highlighted the importance of integrating sustainable energy practices, exemplified by Lee Graves’s award for Renewable Energy Executive of the Year, and celebrated major industry milestones like Exxon’s acquisition of Denbury. In a blend of personal and professional narratives, the prestigious Legacy Award was presented to Kelcey Warren of Energy Transfer Partners, featuring discussions of his career and philanthropic impact on the city, notably Klyde Warren Park.

Now Available: Mercer Capital’s 2023 Energy Purchase Price Allocation Study

Mercer Capital is pleased to announce the release of the “2023 Energy Purchase Price Allocation Study.” This study provides a detailed analysis and overview of valuation and accounting trends in different subsectors of the energy space for the 2022 calendar year. This study researches and observes publicly available purchase price allocation data for four sub-sectors of the energy industry: (i) exploration & production; (ii) oilfield services; (iii) midstream; and (iv) refiners and marketers. 

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 each sub-sector. 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 closed and reported their purchase allocation data in calendar year 2022.

Domestic Production

Leading America Toward Energy Independence

Hart Energy LIVE’s America’s Natural Gas Conference 2023

The recent America’s Natural Gas conference shed light on crucial themes in the energy sector, highlighting an increasing demand for liquefied natural gas (LNG) amid challenges like insufficient pipeline and storage infrastructure, which poses a substantial hurdle to meeting the soaring need both domestically and internationally. Noteworthy initiatives, such as Mexico Pacific’s strategic LNG facility, aim to bridge infrastructural gaps by delivering responsibly sourced natural gas from the Permian Basin to Asian markets, while also focusing on a sustainable and strategic location to optimize shipping and pricing. The discourse at the conference also underscored the notable reduction of CO2 emissions with the rising market share of natural gas, as well as the pragmatic and logistical challenges faced by renewable energy endeavors, indicating that a balanced, multi-faceted approach to energy transition is imperative in ensuring reliability, sustainability, and affordability in global energy supply.

Themes from Q2 2023 Earnings Calls

Part 2: Oilfield Service (“OFS”) Companies

Despite initial downward trends in commodity prices in 2023, a sustained period of healthy prices, particularly for crude oil, has instilled an industry-wide sense of optimism about future growth in spending. Key industry leaders emphasize the role of technologies in boosting operational performance, echoing the sentiment that proper tech implementation is directly linked to better financial outcomes. As companies gear up for a prolonged upcycle in activities, technology and commodity prices are helping set the stage for an optimistic outlook through 2024 and beyond.

Themes from Q2 2023 Earnings Calls

Part 1: Upstream

In the recent Q2 2023 earnings calls, upstream executives noted the shift in their focus from exploration to maintaining production through various strategies, such as acquiring legacy assets and implementing well workovers. Furthermore, leaders predict pressures on the global crude oil supply, with expectations of OPEC+ continuing their production cuts and minimal refinery capacity. Additionally, despite record production levels in the Haynesville Shale, there’s been a noticeable drop in drilling and completion activity, as natural gas prices continue to decline from 2022 highs. Dive deeper in this week’s blog.

Valuation Issues

Industry Expert vs. Valuation Expert: Which Should You Choose?

Choosing an industry expert to value your oil & gas company has several distinct benefits that stem from a deep understanding of the sector’s unique dynamics, trends, and complexities. Selecting a valuation expert to assess your oil & gas company brings a distinct set of advantages rooted in their specialized training, adherence to recognized standards, and a focused approach to valuation. So, which should you choose? In this article, we make the case for choosing an industry expert and then make the case for choosing a valuation expert. Then we suggest the a solution.

Lessons from the Oracle of Omaha

In this week’s post, we feature an entry from our Family Business Director blog that recaps the recent Berkshire Hathaway Shareholder Meeting. While the content is not targeted directly to energy industry participants, it is timeless for all of us. We hope you enjoy!

Eagle Ford Shale Permian Basin

Themes from Q1 2023 Earnings Calls

Part 1: Upstream

The Q1 2023 earnings calls from the upstream segment of the oil and gas industry have brought to light various viewpoints on shareholder returns, presenting a dichotomy between stock buybacks and dividends. Although the Eagle Ford region stands out with its high return rate and generous drilling inventory, the spotlight is gradually shifting towards the Permian Basin, where operators aspire to leverage better well economics, project scheduling flexibility, and cost savings for improved free cash flow.

Mergers, Acquisitions, & Divestitures

Is TXO’s Strategy Paying Off?

The TXO Energy Partners IPO

Amidst the current uncertainty in the upstream world, the case of TXO Energy Partners LP’s recent IPO provides valuable insights into investor behavior. TXO’s focus on optimizing existing wells, maintaining a conservative balance sheet, and a commitment to regular cash distributions are attracting investors seeking stability amidst unpredictable market conditions. We explore TXO’s story and what this might mean for the future of the upstream sector.

Valuation Issues

IRS Valuation Guidance

Mines, Oil and Gas Wells, & Other Natural Deposits

Understanding the behind-the-scenes of mineral property valuation doesn’t need to be difficult. In this blog post, we explain the framework behind mineral property valuation, discussing key concepts and guidance from the Internal Revenue Service. Learn about the cost approach, market approach, and discounted cash flow analysis, as well as the essential factors in determining fair market value. Whether you’re a buyer, seller, or involved in litigation, ensure you’re up-to-date on the intricacies of mineral property valuation. 

Domestic Production Mergers, Acquisitions, & Divestitures

Earnings Stability and Geopolitical Volatility

Two Foes Are Battling Once More

In the mire of much of the chaotic goings on of the world energy markets and Ukraine over the past year, a lot of things have changed. Uncertainty has ruled the day. Commodity prices have now dropped significantly in the last six months. Yet, between the lines, there is optimism for the upstream industry as profitability and cash flows remain, and the possibility for acquisition premiums for target companies re-emerges in 2023.

Valuation Issues

Corporate Finance in 30 Minutes

Updated Whitepaper

Corporate finance does not need to be a mystery. In this updated whitepaper, we distill the fundamental principles of corporate finance into an accessible and non-technical primer.

Themes from Q4 2022 Earnings Calls

Part 2: Oilfield Service Companies

This week we focus on the key takeaways from oilfield service operators’ Q4 2022 earnings call. Common themes include capital investment planning, supply and workforce constraints, and dipping commodity prices.

Themes from Q4 2022 Earnings Calls

Part 1: Upstream

This week we focus on the key takeaways from the Upstream Q4 2022 earnings calls, which include buyback and distribution policies, organic growth opportunities, and an outlook for the rest of 2023.

Valuation Issues

Understanding Oilfield Services Companies & How to Value Them

Understanding the value of an oilfield services (OFS) company is by its very nature, a complex matter. The unpredictable cyclicality of the oilfield services industry requires careful consideration of many industry-wide and company-specific factors in developing a reasonable forecast of future operating results. In our blog this week we feature a whitepaper that provides invaluable guidance in regard to these aspects of the OFS industry.

Valuation Issues

Are You Ready for the Next Recession?

What 2023 Might Have in Store

As we have now put a bow on 2022 and have turned our attention to 2023, we suspect that the dreaded “R word” is on the mind of many of our readers as they contemplate the myriad challenges and obstacles their businesses will face in 2023. Now is the time to think critically about how your business is positioned for a potential economic slowdown. This post offers a few practical steps business owners, directors, and their advisors can take to ensure their business continues to thrive.

All in the Family Limited Partnership

In this week’s post, we share a recent piece from our Family Business Director blog on the topic of Family Limited Partnerships. While the post speaks directly to family-owned businesses, the content is applicable to many because the individual estate tax exemption reverts to $6 million in 2026 from its current level of $12 million. As a result, many estates are beginning to plan now.

Themes from Q3 2022 Earnings Calls

Part 2: Oilfield Service Companies

In part 2 of this Q3 earnings calls series, we focus on key takeaways from Oilfield Service Companies such as the expanding role of international business segments, long-term sustainable growth, and E&P production growth plans.

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