Corporate Valuation, Oil & Gas

September 25, 2017

Impact and Perspective on Hurricane Harvey’s Aftermath: Transforming

Some friends and neighbors of ours drove down to Houston this past weekend to assist with the recovery and cleanup effort in the wake of Hurricane Harvey (we were left with the much easier job of watching one of their children for a few days).

They used to live in Houston and were moved to go down and help in relief efforts.  They, along with a group from their church, came back yesterday with stories and photos of mold from floor to ceiling, throwing housefuls of furniture to the curb, and dead fish that managed to find their way through the floodwaters into people’s living rooms.  To add to the loss, the majority of people affected were not covered by flood insurance.

However, one thing that was not lost was unyielding dignity, hope, and courage that pulsated throughout the city.  This was the most uplifting news to emerge out of the wreckage.  As our friends described it, the experience was “transforming” on many levels.

The Immediate and Residual Impact of Harvey

Don Stowers – Chief Editor of the Oil & Gas Financial Journal recently wrote an editorial on the impact of Hurricane Harvey from an industry perspective. It too was transforming.

According to the editorial - companies now are only beginning to assess the damages.  More than 20% of the oil production from the Gulf of Mexico was taken offline with additional onshore volumes shut-in.  Four terminals in Corpus Christi were closed to tanker traffic.  Nearly 50% of the nation’s refining capacity is located along the Gulf Coast and at least 10 refineries were shut down before the storm’s arrival.  This was felt here in Dallas as long lines and gas shortages were common for some days after the storm.  However, this is anticipated to be more widespread.  NYMEX gasoline contracts spiked to their highest levels in two years.  Analysts say this will continue for months following the storm.

The good news is that the industry will recover in a matter of months.  Terminals will re-open.  Shipping will resume and gas prices will likely return to lower levels.  However, it will take longer for a number of other people to recover.

Yet we remain encouraged by the resilient spirit of the people affected and the scores of inspiring people who are continuing to demonstrate the transformative power of the golden rule: Do to others what you would wish for them to do to you.  Have a great week.

Author
Bryce Erickson
Managing Director
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EP Second Quarter 2026 Permian Basin
E&P Second Quarter 2026

Region Focus: Permian Basin

The Permian Basin continued to demonstrate its resilience in the twelve-month period through June 30, 2026 (the review period). Despite a modest decline in rig counts, production reached new highs as operators continued to emphasize capital discipline, drilling efficiencies, and productivity improvements. Heightened geopolitical tensions introduced considerably greater volatility into commodity markets during the latter portion of the review period, yet oil prices ended above year-earlier levels and Permian public companies posted strong stock price appreciation. While basin operators continue to balance disciplined capital allocation with long-term production growth, the Permian remains the nation’s premier oil-producing basin and continues to demonstrate its ability to adapt to changing market conditions.
Just Released: Q2 2026 Oil & Gas Industry Newsletter
Just Released: Q2 2026 Oil & Gas Industry Newsletter
Regional Focus: The Permian BasinThe Permian continued to demonstrate its resilience in the twelve-month period through June 30, 2026 (the review period). Despite a modest decline in rig counts, production reached new highs as operators continued to emphasize capital discipline, drilling efficiencies, and productivity improvements. Heightened geopolitical tensions introduced considerably greater volatility into commodity markets during the latter portion of the review period, yet oil prices ended above year-earlier levels and Permian public companies posted strong stock price appreciation. While basin operators continue to balance disciplined capital allocation with long-term production growth, the Permian remains the nation’s premier oil-producing basin and continues to demonstrate its ability to adapt to changing market conditions.
Bryce Erickson Discusses the Changing Economics of Upstream Asset Valuations with Hart Energy
Bryce Erickson Discusses the Changing Economics of Upstream Asset Valuations with Hart Energy
Mercer Capital’s Energy Industry Team Leader, Bryce Erickson, ASA, MRICS, recently shared his perspective on upstream asset valuations in two features published by Hart Energy.Bryce joined other industry professionals at Hart Energy’s 2026 Energy Capital Conference, where he participated in the panel, “Asset Valuations in a High-Price World: Separating Signal from Noise.” The discussion examined how investors, lenders, and operators are assessing energy assets amid elevated commodity prices, increasingly scarce drilling inventory, and continued consolidation across the upstream sector.Markets Turn Their Attention to Tier 2 and Tier 3 AcreageIn a video interview with Hart Energy’s Chris Mathews, Bryce discusses how the scarcity of available Tier 1 acreage is directing greater attention toward Tier 2 and Tier 3 opportunities.As the inventory of premium drilling locations becomes increasingly concentrated, buyers are looking more closely at assets that may previously have received less attention. Higher commodity prices and continued improvements in drilling and completion techniques can make some of these locations more economically attractive. However, broad acreage classifications tell only part of the story. Investors must still examine the specific geology, operating costs, development plans, decline expectations, and risks associated with each asset. Bryce’s comments underscore the importance of disciplined, asset-specific underwriting as competition expands beyond traditionally defined core acreage.How the “Last Cheap Barrels” May Influence BidsHart Energy’s Lisa El-Amin further explores the relationship between inventory scarcity and upstream deal values in “How the Last Cheap Barrels May Be Shaping Today’s Bids” (subscription required).The article considers how competition is shifting toward a diminishing pool of drilling locations capable of generating attractive returns at approximately $50 oil, with much of that inventory concentrated in the Permian Basin. As low-breakeven locations become harder to acquire or replace, buyers may be willing to place greater value on assets offering durable inventory, favorable cost structures, and a long development runway. The result is an M&A market in which bids are increasingly influenced by the quality and scarcity of future drilling opportunities—not simply current production or near-term commodity prices.Valuation ImplicationsTogether, the two Hart Energy features highlight that asset quality and inventory durability are becoming more visible, and potentially more valuable, as the shale sector matures.Determining how these factors affect a particular company or asset requires careful analysis of its reserves, development inventory, cost structure, operating assumptions, and expected cash flows. Mercer Capital has assisted clients with a wide range of valuation needs in the upstream oil and gas industry across both conventional and unconventional plays in North America and around the world. Contact a Mercer Capital professional to discuss your valuation needs in confidence.

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