Energy Valuation Insights

August 4, 2023 Permian Basin

Value Focus | Exploration & Production

Second Quarter 2023 | Region Focus: Permian

In this quarter’s newsletter we focus on the Permian. Production growth over the past year continued to run well, in the Permian, ahead of growth in the Eagle Ford, Appalachian, and Bakken, as the Permian basin remains one of the most economic regions for U.S. energy production. With the decline in commodity prices over the past year, rig counts fell, with the most significant decline occurring in May. With E&P firms expecting continued cost increases through the remainder of 2023, the Permian’s existing cost advantage will contribute to its continued dominance over the major U.S. basins.

July 28, 2023 Mergers, Acquisitions, & Divestitures Valuation Issues

Exxon’s Acquisition of Denbury

A Tale of Two Businesses, and Neither One Is Worth $4.9 Billion

Exxon made waves in the energy M&A markets by announcing its acquisition of Denbury, Inc. In total, the headline value was around $4.9 billion. However, while Denbury is an energy company on the whole, it is made up of two main segments that have very different economics, and neither of their business segments appears to be worth the $4.9 billion price tag. So what did Exxon buy exactly, and how might one value it?

July 12, 2023 Permian Basin

Permian Production Growth Holds

The economics of oil and gas production, particularly in the Permian basin, have seen significant shifts over the last year, with the basin outpacing others in production despite declining rig counts. A significant drop in oil and gas prices has had a direct impact on the industry, and there’s a rising expectation among executives for increased production costs by the end of 2023. Despite these challenges, the Permian’s inherent cost advantages position it to maintain its dominance in the U.S. energy sector.

June 30, 2023 Mergers, Acquisitions, & Divestitures Permian Basin

M&A in the Permian

Acquisition Growth Flat Ahead of Expected Surge

Despite a flat transaction activity in the Permian Basin over the past year, the increasing scarcity of Grade-A drilling sites has led to a spike in the value of deals, with two recently closed deals valued at over $2 billion each. Amidst this landscape, companies are paying more per acre than before, with the median price per net acre increasing by 43% year-over-year, potentially suggesting a shift in focus towards undeveloped acreage. Furthermore, recent transactions, such as Civitas Resources’ $4.7 billion acquisitions of oil-producing assets in the Midland and Delaware Basins, highlight the industry’s continued attraction to the Permian Basin’s potential for high-return drilling inventory.

June 23, 2023 Mineral and Royalty Rights

Mineral Aggregator Valuation Multiples Study Released

With Market Data as of June 19, 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.

June 16, 2023 Special Topics

Lessons from the Oracle of Omaha

In this week’s post, we feature an entry from our Family Business Director blog that recaps the recent Berkshire Hathaway Shareholder Meeting. While the content is not targeted directly to energy industry participants, it is timeless for all of us. We hope you enjoy!

May 22, 2023 Eagle Ford Shale Permian Basin Special Topics

Themes from Q1 2023 Earnings Calls

Part 1: Upstream

The Q1 2023 earnings calls from the upstream segment of the oil and gas industry have brought to light various viewpoints on shareholder returns, presenting a dichotomy between stock buybacks and dividends. Although the Eagle Ford region stands out with its high return rate and generous drilling inventory, the spotlight is gradually shifting towards the Permian Basin, where operators aspire to leverage better well economics, project scheduling flexibility, and cost savings for improved free cash flow.

May 12, 2023 Mergers, Acquisitions, & Divestitures Special Topics

Is TXO’s Strategy Paying Off?

The TXO Energy Partners IPO

Amidst the current uncertainty in the upstream world, the case of TXO Energy Partners LP’s recent IPO provides valuable insights into investor behavior. TXO’s focus on optimizing existing wells, maintaining a conservative balance sheet, and a commitment to regular cash distributions are attracting investors seeking stability amidst unpredictable market conditions. We explore TXO’s story and what this might mean for the future of the upstream sector.

May 5, 2023 Special Topics Valuation Issues

IRS Valuation Guidance

Mines, Oil and Gas Wells, & Other Natural Deposits

Understanding the behind-the-scenes of mineral property valuation doesn’t need to be difficult. In this blog post, we explain the framework behind mineral property valuation, discussing key concepts and guidance from the Internal Revenue Service. Learn about the cost approach, market approach, and discounted cash flow analysis, as well as the essential factors in determining fair market value. Whether you’re a buyer, seller, or involved in litigation, ensure you’re up-to-date on the intricacies of mineral property valuation. 

April 27, 2023 Eagle Ford Shale

Value Focus | Exploration & Production

First Quarter 2023 | Region Focus: Eagle Ford

In this quarter’s newsletter, we focus on the Eagle Ford. Strong rig-count growth spurred an Eagle Ford production increase that was second only to the Permian. However, production improvement was offset by commodity price easing in the latter half of 2022 and early 2023, resulting in Eagle Ford comp group stock price declines over the last year. Despite those dynamics, interest in the Eagle Ford remains high.