Energy Valuation Insights

February 9, 2024 Domestic Production Special Topics

Just Released | 4Q23 Exploration & Production Newsletter

REGIONAL FOCUS: HAYNESVILLE SHALE

The 4Q23 issue of Mercer Capital’s Exploration & Production newsletter focuses on the Haynesville Shale. Haynesville production held up reasonably well during the 2023 review period, particularly considering the sharp fall-off in the basin’s rig count. Despite the Henry Hub natural gas front month futures prices ending the year well below their starting point, the outlook for the Haynesville basin is favorable and anticipated to continue growing due to rising demand from LNG facilities and petrochemical plant development along the U.S. Gulf Coast.

In addition to our overview of the Haynesville, this newsletter also contains:

– Oil and Gas Commodity Price Update
– 2024 Outlook for the Industry
– Industry M&A Activity
– Public Company Performance
– Production Update
– Rig Counts

Download the newsletter to stay up to date on the industry.

February 2, 2024 Special Topics Valuation Issues

Non-Operating Working Interests in Oil & Gas

Part 1: Characteristics of Non-Op Working Interests, the Risks, and the Benefits

In the intricate world of oil and gas investments there are many ways that ownership from hydrocarbon production can be divided. One way is through non-operating working interests which is, to many, a less familiar ownership position. This post explores the nuanced distinctions between traditional operating working interests and non-operating (non-op) interests, highlighting how the latter, despite sharing cost burdens, lack decision-making power in operational matters.

With a focus on the economic implications, risks, and benefits for investors, particularly through the lens of companies like Northern Oil and Gas, we discuss the complex dynamics and strategic financial maneuvers within the industry, setting the stage for a deeper exploration of valuation and economics in next week’s post.

January 25, 2024 Domestic Production Mergers, Acquisitions, & Divestitures Special Topics

2024 Oil and Gas Outlook

A Year Of Divergence

U.S. oil seems to be headed toward a period of upward price pressure. U.S. natural gas on the other hand, appears to be back in a somewhat oversupplied position.

January 19, 2024 Mergers, Acquisitions, & Divestitures

The Chesapeake and Southwestern Merger

Reshaping U.S. Natural Gas

Chesapeake Energy Corporation and Southwestern Energy Company announced a merger to create the largest natural gas producer in the United States, with an expected output of 7.9 billion cubic feet per day. This $7.4 billion all-stock deal, expected to close in the second quarter of 2024, will see Southwestern investors receiving 0.0867 shares of Chesapeake for each of their shares. The combined company, with an estimated enterprise value of $23 billion, hopes to gain easier access to capital, achieve investment-grade status, and possibly join the S&P 500 while navigating potential antitrust concerns and a potential decrease in NGL prices.

January 12, 2024 Domestic Production

Haynesville DUCs Buoy Production Despite Rig Count Decline

The economics of oil & gas production vary by region.  Mercer Capital focuses on trends in the Eagle Ford, Permian, Haynesville, 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.  This quarter, we take a closer look at the Haynesville shale.

January 5, 2024 Domestic Production

Initiating Coverage of the Haynesville Shale

In 2023, the Haynesville shale, a significant natural gas source in the U.S., experienced a downturn in drilling activity due to low natural gas prices (70% price drop from August 2022). This decline also affected rig counts and day rates, with a notable decrease in both. Despite the market volatility, some M&A activity occurred, including WhiteHawk Energy’s acquisition of mineral interests. Rumored activity included Chevron’s potential sale of its Haynesville assets, indicating a continued interest in this region’s natural gas potential.

December 15, 2023 Eagle Ford Shale Mergers, Acquisitions, & Divestitures Mineral and Royalty Rights Permian Basin Special Topics Valuation Issues

Top 10 Blog Posts of 2023

Year-end 2023 is quickly approaching so that means it’s time to take a look back at the year. Here are the top ten posts for the year measured by readership. Thank you to our readers for your constant support! It’s our honor to cover the oil & gas industry for you.

December 7, 2023 Special Topics

Remembering Charlie Munger

His Investment Wisdom and Legacy

In this week’s post, we honor the late Berkshire Hathaway Vice Chairman by delving into his insightful quotes. Our colleague Brooks Hamner discusses Mungerisms like the pitfalls of flashy investment strategies and the skepticism around cryptocurrency, to the critique of over-diversification and reliance on traditional financial metrics like EBITDA. When it comes to investing in any industry or business, no one had more unique ideas than Charlie Munger.

December 1, 2023 Mineral and Royalty Rights

Mineral Aggregator Valuation Multiples Study Released

With Market Data as of November 17, 2023

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.

November 17, 2023 Mergers, Acquisitions, & Divestitures Special Topics

Themes from Q3 Earnings Calls

Part 2: Oilfield Service (“OFS”) Companies

Key themes we saw in Q3 earnings calls for oilfield service (“OFS”) companies were a rebound in activity, increased M&A in the space, and a focus on capital returns. Operators agree on a positive outlook for 2024, driven by factors like healthy commodity prices and global demand. As the industry evolves and OFS operators continue to make strategic shifts, we’ll keep you updated on future changes.