Energy Valuation Insights

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

Mergers, Acquisitions, & Divestitures Permian Basin Special Topics

Pioneer Natural Resources Pay to Play

A Tale of Two Transactions

M&A transactions picked up in the 12-months ended mid-June relative to the 12-month period preceding it. Among all the transactions that occurred over this period, one pair jumped out involving a common buyer and for which valuation metrics were available. These related to Pioneer’s acquisition of Parsley Energy in October 2020 and DoublePoint Energy in April 2021. In this post, we take a deeper dive into each transaction.

Special Topics

How to Value Oil Companies in the Biden Era

Like a small boat navigating a big sea, oil & gas valuations are impacted by a plethora of factors that can change almost instantly. Some factors help in arriving at a shareholder’s destination, others do not.  Some factors the crew can control, others not so much (and some factors are more predictable than others). As this vessel heads for the destination shores of high returns, it must navigate through natural economic influencers such as production risk, commodity prices, supply logistics and demand changes. In addition, it also must face regulatory shifts that the Biden Administration is and could generate in the future such as tax changes, policy shifts and more. Most likely, these policies will create some volatility and headlines, but in the aggregate will not change valuations much. In this post we examine a few of these regulatory items and how they might change the course of an oil and gas company’s valuation going forward.

Mineral and Royalty Rights

Mineral Aggregator Valuation Multiples Study Released

With Market Data as of May 26, 2021

Mercer Capital has its finger on the pulse of the minerals market.  An important trend has been the rise of mineral aggregators, which have largely supplanted the trusts as the primary method of publicly traded minerals ownership. Due to a variety of corporate structures (including master limited partnerships and Up-Cs) and complex capital structures (including preferred equity and non-traded common units), mineral aggregator enterprise values pulled from databases are often missing meaningful components of value, leading to skewed valuation multiples.

Mercer Capital has 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.

Special Topics

Themes from Q1 2021 Earnings Calls

Part I: E&P Operators

Things appear to be on the upswing, albeit with cautious optimism, in the exploration and production space.  Most of the eight E&P operators we tracked reported that operations in the first quarter were relatively stable in spite of winter storm Uri. The ultimate trending phrase in E&P operators’ earnings calls was “positive free cash flow.” Deleveraging remains a primary goal for many operators. In addition, few E&P operators seemed overly concerned with the potential tax implications stemming from regulatory changes brought forth by the Biden Administration.

Eagle Ford Shale Mergers, Acquisitions, & Divestitures Special Topics

Recent SPAC Boom Largely Leaves Out Oil & Gas Companies

The rise of SPACs, or special purpose acquisition companies, has been the hottest trend in capital markets during the past year.

In this blog, we take a look at a few oil & gas companies that were early adopters of the SPAC structure, review the recent pivot of SPACs towards energy transition companies, and see what the future might hold for the few remaining oil & gas-focused SPACs.

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