Corporate Valuation, Oil & Gas
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July 25, 2016

Oil and Gas Market Discussion: Part 2

In May 2016, we attended a panel event discussing investment opportunities in the financially distressed oil and gas sector. The panel included a “who’s who” of oil and gas experts located in Texas. Two industry participants, two consultants, one analyst and one economist discussed the economic outlook for energy prices and then corporate strategy and investment opportunities given the economic outlook. This post, the second and last summarizing this panel discussion, will report opinions given on corporate strategy and investment opportunities. (To read more about the economic outlook please read here.)

Corporate Strategy

After discussing the price outlook, the panelists shifted the conversation to practical decision making based on our limited ability to forecast price changes. First, they looked at corporate strategy. Merger and acquisition activity has slowed. Once oil prices started to decline in mid-to-late 2014, the M&A market fell quiet for more than 12 months. This “silent period” is a normal reaction to high volatility periods. For corporations trying to make decisions for the long term, volatility creates an uncertain future, and thus an unfriendly environment for investment. However, the panelists believe the “silent period” is now reaching a breaking point as the amount of debt carried by some companies is beginning to force action. One panelist commented that while there are “no willing sellers in the market,” some transactions have occurred when a “forced seller” tries to avoid or prolong filing for bankruptcy protection.

Those bankruptcies are happening more and more frequently, leading one participant to describe four types of energy companies in the market today:

  1. The “I need to restructure yesterday” company;
  2. The “In denial about restructuring” company;
  3. The “Racing to restructure” company (to be healthier when oil prices recover); and
  4. The “Low leverage / healthy” company (looking for opportunities);
By categorizing each active company in the oil and gas market into one of these four buckets, it is easier to interpret some companies’ actions, and therefore to interpret the direction of the market. This in turn enables wiser investment strategies.

Investing Opportunities

Two areas of opportunity discussed were reserves and oil field services. A panelist who actively invests in “low risk, existing producing properties with PUD (proved undeveloped wells) rights” described the potential value of investing in reserves. In recent transactions, this particular panelist was able to pay a purchase price based only on the value of the given property’s PDPs (proved developed producing reserves). The only properties for which he may make an exception and allocate “a little” value for the non-producing areas are those located in the Permian Basin. The time horizon for this investment is definitely long term as the strategy depends on the price of oil recovering so that the PUD opportunities—which the investor pays nothing for in this current market—become valuable again. Thus, this strategy works well for experienced investors with enough cash to pull it off, such as investment funds or other E&P companies.

The second investing opportunity is more easily accessible to the average retail investor than purchasing reserves. This simpler opportunity focuses on investing in “higher quality oil field service companies that live in the operating expenses of exploration and production companies.” There are a couple positives to this strategy. Since existing wells must be maintained, this strategy enables one to invest in a high quality company that receives regular business from E&P companies, while also taking advantage of the fact that most companies operating in the oil and gas sector are trading at discounted prices. Furthermore, if prices recover, more wells will be drilled and completed, and these too will need to be maintained. Thus, high quality oilfield service companies may offer low risk returns in the current environment while also offering considerable upside if oil prices increase. A market data point to monitor for this investment strategy is the drilled but uncompleted well count and the well completion count data. As discussed in the previous post, this information is more directly tied to future production than the commonly referred to rig count data, and an increase in completions will mean an increase in business for oil field services companies.

Summary

Overall, this panel was a helpful reminder to stay focused on the basics during times of turmoil. Basic supply and demand factors world-wide are still driving the price of oil and gas. The only change has been the behavior of certain suppliers (OPEC) and doubts about future demand (country specific). Because of the way those changes have affected oil prices, overleveraged E&P companies will be forced to restructure their debt or be forced out of the market. After an 18 month “silent period,” more action is either expected in the near term as these debts become due. Lastly, having available, investable cash is critical in order to take advantage of certain investing opportunities in the market today. Certain strategies favor professional and institutional investors, while others can be enjoyed by retail investors. Overall, it is a very volatile time in oil and gas. The perspectives of these six experts in their respective fields provide guidance for strategy and investing in the near and long term. If you want to move forward either as a company interested in M&A activity or as an investor, utilizing an experienced oil and gas reserve appraiser can help to further lift the fog on valuation issues in this current, hazy environment. Contact Mercer Capital to discuss your needs and learn more about how we can help you succeed.

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Defying the Cycle: Haynesville Production Strength in a Shifting Gas Market
Defying the Cycle: Haynesville Production Strength in a Shifting Gas Market
Haynesville shale production defied broader market softness in 2025, leading major U.S. basins with double-digit year-over-year growth despite heightened volatility and sub-cycle drilling activity. Efficiency gains, DUC drawdowns, and Gulf Coast demand dynamics allowed operators to sustain output even as natural gas prices fluctuated sharply.
Haynesville Shale M&A Update: 2025 in Review
Haynesville Shale M&A Update: 2025 in Review
Key TakeawaysHaynesville remains a strategic LNG-linked basin. 2025 transactions emphasized long-duration natural gas exposure and proximity to Gulf Coast export infrastructure, reinforcing the basin’s importance in meeting global LNG demand.International utilities drove much of the activity. Japanese power and gas companies pursued direct upstream ownership, signaling a shift from traditional offtake agreements toward greater control over U.S. gas supply.M&A was selective but meaningful in scale and intent. While overall deal volume was limited, announced transactions and reported negotiations reflected deliberate, long-term positioning rather than opportunistic shale consolidation.OverviewM&A activity in the Haynesville Shale during 2025 was marked by strategic, LNG-linked transactions and renewed international investor interest in U.S. natural gas assets. While investors remained selective relative to prior shale upcycles, transactions that did occur reflected a clear pattern: buyers focused on long-duration gas exposure, scale, and proximity to Gulf Coast export markets rather than short-term development upside.Producers and capital providers increasingly refocused efforts on the Haynesville basin during the year, including raising capital to acquire both operating assets and mineral positions. This renewed attention followed a period of subdued transaction activity and underscored the basin’s continued relevance within global natural gas portfolios.Although the Haynesville did not experience the breadth of consolidation seen in some oil-weighted plays, the size, counterparties, and strategic motivations behind 2025 transactions reinforced the basin’s role as a long-term supply source for LNG-linked demand.Announced Upstream TransactionsTokyo Gas (TG Natural Resources) / ChevronIn April 2025, Tokyo Gas Co., through its U.S. joint venture TG Natural Resources, entered into an agreement to acquire a 70% interest in Chevron’s East Texas natural gas assets for $525 million. The assets include significant Haynesville exposure and were acquired through a combination of cash consideration and capital commitments.The transaction was characterized as part of Tokyo Gas’s broader strategy to secure long-term U.S. natural gas supply and expand its upstream footprint. The deal reflects a growing trend among international utilities to obtain direct exposure to U.S. shale gas through ownership interests rather than relying solely on long-term offtake contracts or third-party supply arrangements.From an M&A perspective, the transaction highlights continued willingness among major operators to monetize non-core or minority positions while retaining operational involvement, and it underscores the Haynesville’s attractiveness to buyers with a long-term, strategic view of gas demand.JERA / Williams & GEP Haynesville IIIn October 2025, JERA Co., Japan’s largest power generator, announced an agreement to acquire Haynesville shale gas production assets from Williams Companies and GEP Haynesville II, a joint venture between GeoSouthern Energy and Blackstone. The transaction was valued at approximately $1.5 billion.This acquisition marked JERA’s first direct investment in U.S. shale gas production, representing a notable expansion of the company’s upstream exposure and reinforcing JERA’s interest in securing supply from regions with strong connectivity to U.S. LNG export infrastructure.This transaction further illustrates the appeal of the Haynesville to international buyers seeking stable, scalable gas assets and highlights the role of upstream M&A as a tool for portfolio diversification among global utilities and energy companies.Reported Negotiations (Not Announced)Mitsubishi / Aethon Energy ManagementIn June 2025, Reuters reported that Mitsubishi Corp. was in discussions to acquire Aethon Energy Management, a privately held operator with substantial Haynesville production and midstream assets. The potential transaction was reported to be valued at approximately $8 billion, though Reuters emphasized that talks were ongoing and that no deal had been finalized at the time.While the transaction was not announced during 2025, the reported discussions were notable for both their scale and the identity of the potential buyer. Aethon has long been viewed as one of the largest private platforms in the Haynesville, and any transaction involving the company would represent a significant consolidation event within the basin.The reported talks underscored the depth of international interest in Haynesville-oriented platforms and highlighted the potential for large-scale transactions even in an otherwise measured M&A environment.ConclusionWhile overall deal volume remained selective, the transactions and reported negotiations in 2025 reflected sustained global interest in U.S. natural gas assets with long-term relevance. Collectively, the transactions and negotiations discussed above point to a Haynesville M&A landscape driven less by opportunistic consolidation and more by deliberate, long-term positioning. As global energy portfolios continue to evolve, the Haynesville basin remains a focal point for strategic investment, particularly for buyers seeking exposure tied to U.S. natural gas supply and LNG export linkages.
Mineral Aggregator Valuation Multiples Study Released-Data as of 06-11-2025
Mineral Aggregator Valuation Multiples Study Released

With Market Data as of June 11, 2025

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.

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