Corporate Valuation, Oil & Gas

November 1, 2021

Sharing Growth & Spotlight

Natural Gas & Renewables Join the D-CEO Awards Stage in Dallas

Mercer Capital’s energy team sponsored and attended the D-CEO 2021 Energy Awards in Dallas last week, October 26, 2021.  It was a great event and a good opportunity to connect with clients, peers, and industry leaders in the energy space.   Awards ranged from honoring top executives, including Scott Sheffield of Pioneer Energy, to private equity firm innovators like Pearl Energy Investments.

Oil, Natural Gas, and Renewables

The focus of the night was the interdisciplinary threads between oil, natural gas, and renewables.  “Sustainability and profitability are not mutually exclusive,” said Vikram Agrawal of EarthxCapital who participated on a panel alongside Joe Foran, CEO of Matador Resources.  According to the panelists, renewables and natural gas are to be watched as the energy mix needs evolve in the U.S. and around the world. As an example, natural gas fuels about 40% of our power in the U.S. according to Agrawal.

If the move goes towards more electrification, as illustrated by the news this week that Hertz has ordered 100,000 Tesla electric vehicles, there will be a need for 20% - 40% more power in the next 20 years.  As we’ve discussed before, the current trajectory of renewables appears unable to meet these demand growth needs.  Therefore, cleaner-burning natural gas will be a key contributor.  One panelist mentioned the  exception was hydrogen as a potential contributor.  Interestingly, this was echoed in comments on the latest Dallas Fed Energy Survey:  “The more I become educated on EVs [electric vehicles] and the charging and battery disposal problems, the more I think they will have little effect on the market in the future.  My investigation turns more toward the hydrogen cell as the long-term solution.”

No matter what the source, recent price growth suggests that more investments will be needed.  The panel also stated that oil and gas investment will drop 26% from pre-pandemic levels to $356 billion in 2021.  Various sources, including Exxon, suggest that this figure needs to increase to around $600 billion by 2040.

Optimism for investment opportunities was not limited to upstream, but also infrastructure, with nearly $18 trillion in investment opportunities for energy transmission alone.

Interesting Tidbits & Statistics

Within the theme of investment opportunities, renewables, and natural gas, several interesting factoids from the evening emerged (in no particular order):

1.Electric Vehicles and Charging Stations

    • How many electric vehicles are there for every charging station in the U.S.?
      • The current ratio is 17
      • Many think this ratio needs to be closer to 10 (there are about 42,000 charging stations in the U.S. right now – many at hotels and other overnight destinations)
      • The Biden Administration suggests we need 500,000. Agrawal thinks the real number is 1,000,000 to 1,500,000
2.Electric Cars Are Not a New Thing
    • Did you know that 120 years ago, nearly one-third of our cars were electric?  Granted there were only 4,000 cars at the time.  Did you also know that Thomas Edison invented the first electric-powered car?
3.Investment in the Space Is Picking Up
    • So far this year 35 SPACs acquired businesses worth $100 billion
4.   What Do “Net Zero” or “Carbon Offsets” Really Mean?
    • According to a Wall Street Journal article, only 5% of “carbon offsets” actually remove carbon.

Conclusion

Thanks to our clients, friends, and partners that we saw at the event.  It was fabulous and nostalgic to be getting out again!  And thanks to D-CEO for putting on a great event.  Until next time!

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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