Energy Valuation Insights

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

Mergers, Acquisitions, & Divestitures Special Topics

Chesapeake Finds Vine Ripe for the Picking

In August, Chesapeake Energy Corporation announced that it would acquire Vine Energy Inc. in a stock-and-cash transaction valued at approximately $2.2 billion. We previously discussed Vine’s IPO, which was the first upstream (non-minerals, non-SPAC) initial public offering since Berry Petroleum’s debut in mid-2017. 

Vine’s decision to be acquired in a ~0% premium transaction less than five months after its IPO speaks to the difficulty for E&P companies to manage public market dynamics even in a much-improved commodity price environment. 

In this post, we dig into the transaction rationale, look at relative value measures, and analyze how this transaction seems to indicate a shift in Chesapeake’s strategy.

Special Topics

The Evolution of E&P ESG Scores

Trends from 2016-2020

In this post we take a brief look at several ESG criteria among E&P operators to see what trends may be present among the operators with the highest and lowest ESG scores, as provided by Global Market Intelligence.

Bakken Shale Special Topics

Bakken Recovery Falters

The economics of Oil & 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.

Bakken Shale Mergers, Acquisitions, & Divestitures

Bakken M&A

Transaction Volume and Deal Size Rebound in 2021

Over the last year, deal activity in the Bakken has been steadily increasing after a challenging 2020.  Eight of the nine deals, in the last twelve months, occurred in the last eight months as the price environment has turned more favorable.  As the industry seems optimistic that the worst of COVID-19 is behind us, deal activity may continue to increase into next year, but there is always hesitation, especially with the Delta variant on the rise.

Eagle Ford Shale Permian Basin Special Topics

Oilfield Water Management

Clean Future Act Regulatory Concerns

In the midst of the COVID pandemic, the rise of the Delta-variant, and general summer distractions, not a lot of attention has been given to the 117th Congress’ H.R. 1512 – aka the “Climate Leadership and Environmental Action for our Nation’s Future Act” or the “CLEAN Future Act.”  The Act was first presented as a draft for discussion purposes in January 2020. After more than a year of hearings and stakeholder input, it was introduced as H.R. 1512 in March 2021. Of particular interest to the Oilfield Water Management sector, is Section 625 of the Act.  In that section, the Environmental Protection Agency would be ordered to determine whether certain oil and gas production byproducts, including produced water, meet the criteria to be identified as hazardous waste. The legislation in fact, mandates that the EPA must make its determination within a year after the Act becomes law. Read what Section 625 might mean for Oilfield Water Management industry participants.

Mineral and Royalty Rights

Mineral Aggregator Valuation Multiples Study Released

With Market Data as of August 24, 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.

Mineral and Royalty Rights Special Topics

Themes from Q2 Earnings Calls

Part 2: Mineral Aggregators

Last week, we reviewed the second quarter earnings calls for a select group of E&P companies and briefly discussed the macroeconomic factors affecting the oil and gas industry.  In this post, we focus on the key takeaways from mineral aggregator second quarter 2021 earnings calls.

Special Topics

Themes from Q2 Earnings Calls

Part 1: E&P Operators

In Part I of our Themes from Q1 Earnings, there was cautious optimism in the E&P space as most of the operators we tracked reported relatively stable performance. In the Q2 E&P operator earnings calls, there was continued discussion of positive free cash flow, as well as deleveraging and a return of capital to shareholders. Notably, commentary regarding any tax implications arising from Washington was absent this time around, and previously outlined ESG initiatives, perhaps not surprisingly, were also all well on track, if not better, this quarter than in Q1. In this latest round of earnings calls, however, the primary themes were nuanced with indications of tempered growth plans, and continued growth in free cash flow stemming from increased operational efficiency in spite of projected inflation.

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