A weekly update on issues important to the oil and gas industry
This week, we explore the Q3 2024 earnings calls of Upstream and OFS companies, noting a focus on technological efficiency, optimized capital allocation, and expectations for natural gas demand in the long term. We examine some notable quotes from recent earnings call transcripts to gain insights into how industry leaders are navigating current challenges and positioning themselves for the future in an evolving energy landscape.
Buy-sell agreements don’t matter until they do. When written well and understood by all the parties, buy-sell agreements can minimize headaches when a company hits one of life’s inevitable potholes. But far too many are written poorly and/or misunderstood. Directors are always eager to discuss best practices for buy-sell agreements. In this week’s post, we talk to Chris Mercer, Mercer Capital’s founder and author of four books on buy-sell agreements, and ask, “Is there a ticking time bomb lurking in your business?”
This year’s National Association of Royalty Owners (NARO) National Convention was held in Houston and Mercer Capital’s Bryce Erickson, ASA, MRICS and David Smith, CFA, ASA had the privilege of attending. NARO has represented the interests of oil and gas royalty owners for over 40 years, seeking to support, advocate and educate for the empowerment of mineral and royalty owners. In addition to offering beneficial education opportunities, the event served as a valuable networking opportunity, connecting mineral and royalty owners with fellow owners as well as professional service providers specific to these assets. In this week’s post, we recap the event and provide valuable educational resources for our readers.
This year, Mercer Capital had the privilege of attending the 2024 D CEO Energy Awards, an event that celebrates the energy sector and honors leadership and companies from across the value chain that impact the Dallas-Fort Worth metroplex. In addition to celebrating individual accomplishments, the event served as a valuable networking opportunity, connecting energy leaders, innovators, and key industry players. In this week’s post, we recap the event and key award winners in the energy industry for our readers.
Mercer Capital is pleased to announce the release of the 2024 Energy Purchase Price Allocation Study. This study researches and observes publicly available purchase price allocation data from companies primarily contained in one of the four sub-sectors of the energy industry: (i) exploration & production; (ii) oilfield services; (iii) midstream; and (iv) downstream. 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 these sub-sectors of the energy space. 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 reported their purchase allocation data in calendar year 2023 and not reported in previous annual filings.
The Haynesville/Bossier Shale was discovered in 2008 in East Texas and Western Louisiana. As a play, it differs from other reserves in that it is saturated with smaller independent operators compared to plays like the Eagle Ford and the Permian over the last decade. Despite its challenges, the current market indicates brighter days ahead for the Haynesville. We explore the latest trends in the basin in this week’s post.
The Q3 2024 issue of Mercer Capital’s Exploration and Production Newsletter focuses on the Appalachian basin. Appalachian production declined over the last twelve months due to reduced drilling activity, driven by low natural gas prices and high storage inventory. Consequently, Appalachian E&P stocks generally saw year-over-year price drops across the board. Despite recent setbacks, there is optimism for 2025.
In a year where natural gas prices have spent most of the year under $3.00, the stock prices of publicly traded Appalachian gas producers have remained remarkably stable. This could come across as surprising. Appalachia has some disadvantages to other US gas producing basins, such as takeaway capacity, logistics, and longer distances to major LNG production facilities. However, since 2022 the stock market has held steady for these companies; of which this confidence has outlasted commodity price and earnings declines over the past two years.
We are excited to share the release of Z. Christopher Mercer’s latest book, “Buy-Sell Agreements: Valuation Handbook for Attorneys” published by the American Bar Association. This week, we share an excerpt from the book and what you can expect to find in the full copy.
The economics of oil & gas production vary by region. Mercer Capital focuses on trends in the Eagle Ford, Permian, Haynesville, and Marcellus and Utica plays. The cost of producing oil and gas depends on the geological makeup of the reserve, depth of the 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 Marcellus and Utica shales, specifically the Appalachian basin.
