Energy Valuation Insights

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


Special Topics

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.

Themes from Q3 2022 Earnings Calls

Part 1: Upstream

This week, we focus on the key takeaways from the Q3 2022 Upstream earnings calls including the continued focus on share buybacks, moderate production growth, and how inflation is limiting that growth.

Takeaways from Two Recent Energy Events in Dallas

Strong Industry Fundamentals, Capital Markets Showing Signs of Resurgence, and Energy Security

In the past week, several energy-related gatherings have been held in the Dallas area. We attended two of them: the D-CEO Energy Awards and Hart Energy’s Energy Capital Conference. We had numerous discussions with company representatives, dealmakers, and service providers.  The marketplace appears excited about the potential for the upcoming year amid challenges. At both events, several industry themes were evident including: the energy industry has strong fundamentals, capital markets are showing signs of a resurgence in needed capital, and energy security is returning to the lexicon.

Now Available: Mercer Capital’s 2022 Energy Purchase Price Allocation Study

Mercer Capital is pleased to announce the release of the “2022 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 2021 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. This study 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 2021.

How Waves Of Reality Are Swelling Upstream Returns

Upstream and oilfield service companies have bucked investment trends most of this year. While other industries have had stagnant to negative returns, the oil patch has outperformed them all. Several realities have come to the forefront to build this wave: world, production, and capital realities.

Themes from Q2 2022 Earnings Calls

Part 2: Oilfield Service Companies

This week we focus on the key takeaways from Oilfield Service Operators’ Q2 2022 earnings calls. We discuss how COVID impacted the OFS industry, a shift in strategy due to limited supply, and the industry’s outlook in the face of a potential recession. 

Themes from Q2 2022 Earnings Calls

Part 1: Upstream

This week, we focus on the key takeaways from the Q2 2022 Upstream earnings calls including strong balance sheets, the increasing role of share buybacks, and supply and demand in the global oil & gas commodities market.

Meet the Team: J. David Smith, ASA, CFA

In each “Meet the Team” segment, we highlight a different professional on our Energy team. This week we highlight David Smith, Senior Vice President of Mercer Capital and a senior member of the Oil and Gas Industry Team. The experience and expertise of our professionals allow us to bring a full suite of valuation, transaction advisory, and litigation support services to our clients. We hope you enjoy getting to know us a bit better.

Valuation Issues

U.S. LNG Exports

Part 2: A Closer Look at Projected U.S. LNG Export Terminal Capacity

In Part 1 of our analysis on U.S. LNG Export Terminal Facilities, we examined trends in the number of LNG export facility applications and approval rates from 2010 through 2021, and examined the projected export capacity relative to the projected export volumes of U.S. LNG from 2022 through 2031.  In Part 2 of our analysis, we take a closer look at the anticipated export capacity proposed to come online over the near and mid-term horizons to better understand the underlying factors that have spurred so many projects, seemingly far in excess of projected level of LNG exports from the U.S.

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