Industry Expert vs. Valuation Expert: Which Should You Choose?

Special Topics Valuation Issues

In the complex world of the oil & gas industry, a nuanced understanding of industry intricacies and valuation principles is vital. While it’s common to find specialists in either industry knowledge or valuation methods, a complete solution requires a synergy of both these domains. In this article, we explore the unique benefits of both industry and valuation experts before delving into why a firm with expertise in both these areas is the best choice for oil & gas industry companies.

The Case for an Industry Expert

Choosing an industry expert to value your oil & gas company has several distinct benefits that stem from a deep understanding of the sector’s unique dynamics, trends, and complexities. Here’s a breakdown of some of the key advantages.

Long-Time Analysts of the Oil & Gas Industry

Industry experts are veterans in analyzing the oil & gas sector, employing years of observation and insight to interpret trends and make accurate predictions. They have an intimate understanding of the factors affecting the oil & gas sector, including regulatory changes, technological advancements, market demand, geopolitical influences, and environmental considerations. Industry experts are often well-versed in current market trends, including supply and demand dynamics, price fluctuations, and competitor strategies.

Understanding of Industry Concepts and Terminology

Their grasp of specific oil & gas terminology and concepts ensures that the valuation process is more tailored and precise. They know what factors to consider and how these factors interplay within the context of the industry.

Writing/Speaking about Industry Trends

With a thorough knowledge of the industry’s evolution, these experts can provide invaluable insights and analysis on emerging trends.

Transaction Experience

Industry experts have hands-on experience in dealing with transactions within the oil & gas sector, including with upstream E&Ps, JVs, Partnerships, and LLCs.

Advisory Services

Industry experts are often sought to provide advisory services and are attuned to the market as typical acquirers and divestors of assets, entities, and interests in the oil & gas industry.

Enhanced Credibility

Finally, an industry expert’s valuation may carry more weight with stakeholders and regulatory authorities due to their specialized knowledge and experience in the oil & gas field. It reflects a deep understanding of the unique attributes of the industry.

The Case for a Valuation Expert

Selecting a valuation expert to assess your oil & gas company brings a distinct set of advantages rooted in their specialized training, adherence to recognized standards, and a focused approach to valuation. Here are the key benefits.

Training, Professional Designations, and Valuation Standards

With specialized training and professional certifications, valuation experts bring credibility and expertise to the valuation process, adding confidence for stakeholders, investors, and regulators. In addition, valuation experts are trained in internationally recognized standards and methodologies. This ensures that the valuation is consistent, transparent, and in compliance with legal and regulatory requirements.

Objective Perspective

Valuation experts approach the market as hypothetical buyers and sellers, providing an unbiased and objective perspective. This helps in creating a fair and neutral valuation that can withstand scrutiny.

Expertise in Valuing Minority Interests

Valuation experts have specialized skills in valuing minority interests, ensuring a fair and comprehensive understanding of all ownership stakes within the company.

Advising on Buy-Sell Agreements

Valuation experts can provide critical insights into contractual agreements that dictate the buying and selling of ownership interests.

Defense in Litigated Matters

Valuation experts have experience in defending their work in litigated matters. If the valuation were ever challenged in court, their expertise could be instrumental in upholding the assessment.

Handle Recurring Tax and/or Valuation Work

Valuation experts can handle regular tax and valuation work, providing consistency and continuity, and ensuring ongoing compliance with tax laws and regulations.

Cross-Industry Knowledge

Valuation experts often have experience across various industries, allowing them to bring a broader perspective to the valuation. They can apply lessons and insights from other sectors to the unique context of the oil & gas industry.

Why You Need Both

The best solution for an oil & gas company is to employ a firm that combines the experience and insights of both an industry and valuation expert. While industry experts bring the contextual understanding and transaction experience, valuation experts provide the specialized valuation skills that ensure accuracy and compliance with legal standards.

The Mercer Capital Example

Mercer Capital, organized according to industry specialization, stands as a prime example of a firm embracing both these crucial elements:

  • Industry Specialization: Our energy team has an extensive specialty oil & gas background, experience, and training. We’ve worked with operating entities, assets, and joint ventures throughout all phases of commodity price cycles.
  • Recognition: Writing and speaking regularly on industry topics through channels like & Hart Energy, Mercer Capital has gained a reputation as a thought leader.
  • Expert Valuations: Our firm has provided expert valuation opinions to over 15,000 clients across the globe, upheld by court jurisdictions and regulatory bodies like the IRS & PCAOB.
  • Leadership: Actively leading in the valuation profession, Mercer Capital offers training to other professionals within the valuation, accounting, and legal communities.
  • Global Reach: Our international experience spans Europe, the Middle East, South America, and nearly every major domestic basin and play.

Through a unique combination of industry expertise and valuation specialization, Mercer Capital offers a holistic approach that caters to the multifaceted needs of the oil & gas sector, positioning itself as a preferred partner in this dynamic industry.

Contact one of our professionals to discuss your valuation issue in confidence.

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