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.
A weekly update on issues important to the oil and gas industry
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 the recent Q2 2023 earnings calls, upstream executives noted the shift in their focus from exploration to maintaining production through various strategies, such as acquiring legacy assets and implementing well workovers. Furthermore, leaders predict pressures on the global crude oil supply, with expectations of OPEC+ continuing their production cuts and minimal refinery capacity. Additionally, despite record production levels in the Haynesville Shale, there’s been a noticeable drop in drilling and completion activity, as natural gas prices continue to decline from 2022 highs. Dive deeper in this week’s blog.
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. 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. So, which should you choose? In this article, we make the case for choosing an industry expert and then make the case for choosing a valuation expert. Then we suggest the a solution.
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.
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?
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.
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.
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 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!
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.
