Energy Valuation Insights

April 28, 2020 Current Events Valuation Issues

Uncharted Valuation Territory: What Is A Barrel Or An Acre Worth Today?

Times are tumultuous for the oil and gas industry. News earlier this month was met with no rise in West Texas Intermediate pricing at the time. It hovered around $20.00 per barrel. Last week it fell to the seemingly unconscionable negative territory. It was worse in other places. In Western Canada heavy select oil was around $4.50 per barrel and dropped to $0 last week. It went negative as well. World demand for oil has dropped somewhere between 20% and 35% by some estimations, and excess supply has been building for weeks.

Something must give, and something will. While global supply and demand imbalance has the industry scrambling in unseen territory, how does this convert to what upstream companies and reserves are worth amid the situation? Is it a 1:1 price to value change ratio? Depending on perspective, the answer is both simple and complicated.

April 14, 2020 Special Topics Uncategorized

Saudi Arabia, Russia, or the United States – Did One of the Players Blink?

It’s been a truly dizzying time in the rough-n-tumble world of oil production.  Like they say, if you miss a day, you miss a lot.  For now, it at least appears that someone may have just blinked.  The Trump administration seems to be on the verge of a truly historic deal to cut worldwide oil production and bring oil prices up to a modestly workable level.  And that with the U.S. not committing to forcing domestic producers to cut production levels but indicating that U.S. production would “naturally” decline without the government’s intervention. That coupled with a potential side-deal with Mexico to “cover” part of the production decrease that was being sought from that country, but that Mexico is unwilling to shoulder on its own. Will it work?  Will the deal be accomplished? Although an agreement was reached to reduce oil production in light of demand destruction caused by the coronavirus pandemic, oil markets appear to remain oversupplied.  Will OPEC+ and other nations agree to another deal to further reduce production?  Will U.S. production decline faster than anticipated due to low oil prices? Will the Texas Railroad Commission implement proration orders for Texas producers? All we can say is, stay tuned – and expect the unexpected.

April 6, 2020 Current Events Special Topics

1st Quarter 2020 Oil & Gas Industry Overview

In this post we examine the macroeconomic factors that have affected prices in this first quarter.

March 27, 2020 Eagle Ford Shale

Eagle Ford Update

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. This quarter we take a closer look at the Eagle Ford.

March 19, 2020 Eagle Ford Shale Mergers, Acquisitions, & Divestitures

Eagle Ford M&A

Steady Transaction Activity Restrained by Unforeseeable Circumstances

Over the last year, deal activity in the Eagle Ford Shale was relatively steady, picking up towards the end of 2019 and carrying into early 2020. This week we discuss recent transactions in the Eagle Ford.

March 17, 2020 Bankruptcy Valuation Issues

Energy Valuations: Freefall Into Bankruptcy Or Is This Time Different?

Energy valuations are taking an epic pummeling. Considering declining demand amid COVID-19 concerns, the initial fallout to the Saudi-Russia feud was predictable. Can Banks Hold On? Can Values Recover?

March 12, 2020 Bankruptcy Special Topics

Current Commodity Price Environment May Lead to Next Round of OFS Bankruptcies

This week we discuss how commodity prices and recent events have impacted the Oil Field Services Industry, and what to expect going forward.

March 5, 2020 Special Topics

Themes from Q4 Earnings Calls

In this post, we examine some of the most discussed items and trends from the Q4 earnings calls, specifically E&P companies and those in the mineral aggregator space.

February 28, 2020 Special Topics

Mercer Capital’s 2019 Energy Purchase Price Allocation Study

Have you downloaded Mercer Capital’s 2019 Energy Purchase Price Allocation Study yet? The study provides a detailed analysis and overview of valuation and accounting trends in these subsectors of the energy space.  It enables key users and preparers of financial … Continued

February 20, 2020 Domestic Production Special Topics

An Overview of Salt Water Disposal

Part 3 | Valuation Considerations

Our previous posts on salt water disposal provided an overview of the sector and detailed the economics of the industry. In this post, we take a deeper dive into specific considerations that are critical to understanding the value of salt water disposal companies.