Energy Valuation Insights

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

Bakken Shale

Bakken Production Has Rebounded, But Operating Challenges Remain Acute

The economics of oil and gas production vary by region. Mercer Capital focuses on trends in the Eagle Ford, Permian, Bakken, and Marcellus and Utica plays. The cost of producing oil and gas depends on the geological makeup of the reserve, depth of 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 Bakken.

Bakken Shale COVID-19 Coverage Mergers, Acquisitions, & Divestitures

M&A in the Bakken

Immense Drop in Deal Activity Due to COVID Concerns

Over the past several years, the Bakken has generally had much lighter acquisition and divestiture activity than other major basins in the United States.  Given that deal activity across the energy sector has dropped an immense 42.7% over the past year, acquisition and divestiture activity has dropped even further in this basin over the past year. Observed deal activity has largely been the result of Northern Oil and Gas growing its production base in the area during the past several years.

COVID-19 Coverage Special Topics

Themes from Q2 2020 Earnings Calls

Part 2: E&P Operators

The oil & gas industry experienced a volatile path to price stability as COVID-19 and the Saudi-Russia price war took a toll on supply and demand.  The road to recovery was apparent late in the quarter and was driven by supply cuts from OPEC+, curtailments by U.S. producers, and an increase in demand.  In this post, we capture the key takeaways from E&P operator second quarter 2020 earnings calls. 

COVID-19 Coverage Special Topics

Themes from Q2 2020 Earnings Calls

Part 1: Mineral Aggregators

The oil & gas industry experienced a volatile path to price stability as COVID-19 and the Saudi-Russia price war took a toll on supply and demand. The road to recovery was apparent late in the quarter and was driven by supply cuts from OPEC+, curtailments by U.S. producers, and an increase in demand. Mercer Capital has aimed to focus on the mineral aggregator space, most recently with the release of the second quarter mineral aggregator valuation multiples analysis. In this post, we capture the key takeaways from mineral aggregator second quarter 2020 earnings calls.

Special Topics

Mercer Capital’s Mineral Aggregator Valuation Multiples Analysis

Market Data as of August 14, 2020

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. As shown in the report, mineral aggregators’ stock prices have declined substantially over the past twelve months, but have rebounded from lows seen earlier in the year. 

Permian Basin

Q2 2020 Exploration & Production Newsletter Release

Region Focus: Permian Basin

This week on the blog we feature our quarterly newsletter, which focuses on the Permian Basin. Notable items include an unprecedented decline in oil prices, the Texas Railroad Commission’s proration discussions, and Pure Acquisition Corporation’s announced acquisition of HighPeak Energy.

Bankruptcy

Bridging Valuation Gaps With Options

How Option Pricing Can Be Used to Understand the Future Potential of Assets Most Affected by Low Prices, PUDs and Unproven Reserves

Due to the precipitous drop in oil prices in 2020, oil E&P companies in the U.S. have struggled to pay their debts, and in many cases already have had to file for bankruptcy. In this post, we re-examine how option pricing, a sophisticated valuation technique, can be used to understand the future potential of the assets most affected by low prices, PUDs and unproven reserves. Whether companies are looking to sell these reserves to improve their cash balance, or are trying to generate reorganization cash flow projections during a Chapter 11 restructuring, understanding how to value PUDs and unproven reserves is crucial to survival in a down market.

Bankruptcy COVID-19 Coverage

Valuation Considerations in Bankruptcy Proceedings

An Overview for Oil & Gas Companies

For oil & gas companies, the decision to file for bankruptcy does not necessarily signal the demise of the business.  If executed properly, Chapter 11 reorganization affords a financially distressed or insolvent company an opportunity to restructure its liabilities and emerge from the proceedings as a viable going concern. Although the Chapter 11 process can seem burdensome, a rigorous assessment of cash flows, and a company’s capital structure can help the company as it develops a plan for years of future success.  The purpose of this post is to provide an explanation of the key valuation-related steps of a Chapter 11 restructuring and help managers realize this potential.

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.

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