Energy Valuation Insights

December 3, 2021 Mineral and Royalty Rights

Mineral Aggregator Valuation Multiples Study Released

With Market Data as of November 29, 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.

In this updated Study, 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.

December 1, 2021 Special Topics

Upstream Producers Are Not Gouging–They’re Tentative. Here Are Three Reasons Why

As commodity prices have risen and Q3 profit reports have rolled in, oil and gas companies have been accused of price gouging. This accusation isn’t true. They are tentative and reticent. Why? The answer is found somewhere among supply and demand dynamics, rising costs, and capital headwinds.

November 18, 2021 Mineral and Royalty Rights Special Topics

Themes from Q3 Earnings Calls

Part 2: Mineral Aggregators

Themes in our Q2 mineral aggregator earnings calls digest included capital discipline by operators, expectations of a very favorable price environment, and increases in distributions to shareholders, resulting in an overall optimistic outlook for the sector.  This week we focus on the key takeaways from the mineral aggregator Q3 2021 earnings calls which addressed anticipated acquisition activity, production expectations, and whether or not the sector remains optimistic about the future.

November 12, 2021 Special Topics

Themes from Q3 Earnings Calls

Part 1: E&P Operators

The Q3 earnings calls for E&P operators continued the theme from Q2 – an oil and gas industry reaching a relatively steady operational state, with efficiencies offsetting cost inflation and helping lead to growth in free cash flow despite the tumultuous past 18 to 24 months. In the Q3 earnings calls, maintaining capital discipline with flat or low growth in production volumes was a point of focus as was E&P operators’ possible approaches to fortify their value proposition to shareholders. Check out this week’s post for details.

November 1, 2021 Special Topics

Sharing Growth & Spotlight

Natural Gas & Renewables Join the D-CEO Awards Stage in Dallas

Mercer Capital’s energy team sponsored and attended the D-CEO 2021 Energy Awards in Dallas earlier this week.  It was a great event and a good opportunity to connect with clients, peers, and industry leaders in the energy space.   Awards ranged from honoring top executives, including Scott Sheffield of Pioneer Energy, to private equity firm innovators like Pearl Energy Investments.

Thematically, the focus of this award dinner was the interdisciplinary threads between oil, natural gas, and renewables. 

October 22, 2021 Special Topics Valuation Issues

Natural Gas Production Levels Are High, But So Are Prices

Natural gas prices are rising. So why is production not ramping up to meet heightened demand? Is the demand mostly coming from the U.S.? What are the ripple effects of higher natural gas prices? We tackle all this and more in this week’s post.

October 15, 2021 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.

October 11, 2021 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.

October 1, 2021 Special Topics Valuation Issues

What Is a Reserve Report?

In this post we discuss the most important information contained in a reserve report, the assumptions used to create it, and what factors should be changed to arrive at Fair Value or Fair Market Value.

September 23, 2021 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.