In each “Meet the Team” segment, we highlight a different professional on our Energy team. This week we highlight David Smith, Senior Vice President of Mercer Capital and a senior member of the Oil and Gas Industry Team. The experience and expertise of our professionals allow us to bring a full suite of valuation, transaction advisory, and litigation support services to our clients. We hope you enjoy getting to know us a bit better.
What attracted you to a career in valuation?
Admittedly, I really didn’t know what a “valuation analyst” was back in 1992 when I responded to a job posting that was distributed by our local CFA Institute chapter – then known as the Houston Society of Chartered Financial Analysts. I had just completed my MBA and was wanting to get into a position that involved more analysis than my then-current job involved, and the Valuation Analyst job description seemed just right to me. I interviewed, got an offer, accepted the position, and was probably a month into the job before I really started to get a good grasp as to what a Business Appraiser “does” – and realized that I loved the job.
Once in the job, what really attracted me to making a career in Business Valuation was the combination of applying economics, accounting, finance, investment analysis, equity analysis, fixed income analysis, money and capital markets, as well as so many other disciplines that I’d studied in my undergraduate and MBA programs. Basically, all the interesting parts of the Chartered Financial Analyst body of knowledge. I have a strong curiosity as to “how things work” or “what makes things tick,” and that curiosity is abundantly satisfied in the analysis that takes place in appraising a business.
What does your personal practice consist of?
As with many in our profession, my Business Valuation career began as a generalist. We performed appraisals for all four primary “purposes” – tax, transaction, financial reporting, and litigation – and we appraised businesses in many different industries. However, having started my Business Valuation career in Houston, our practice always had a double dose of subject companies in the oil and gas industry. Over time, I also developed an industry concentration in the biotech industry. There is plenty there to satisfy my interest in understanding how things work.
Also, over my career, I’ve had the opportunity to work on and gain expertise in performing Fairness Opinions and Solvency Opinions. To this day, those types of projects remain a large part of the projects I’m involved in.
What types of oil & gas industry engagements do you work on?
The types of O&G industry engagements that I work on vary, although they’re somewhat concentrated in oilfield services (OFS). So, I’ve been part of projects involving mud companies, drilling companies, oilfield waste disposal (saltwater disposal) companies, oilfield equipment (pumps, valves, downhole tools, drilling pipe, seismic equipment, seismic vehicles, drilling equipment, offshore floatation equipment, offshore trenching, ROVs, etc.) manufacturing businesses, and a variety of oilfield services companies. The purpose of those projects is quite varied as well, including federal tax, financial reporting, and transaction purposes.
What are the capabilities of Mercer Capital’s Oil & Gas Industry team?
Mercer Capital’s Oil & Gas Industry Team capabilities are unusually broad. In addition to our capabilities in the exploration and production (E&P), OFS, midstream and downstream areas, we also have top-notch capabilities in appraising reserves, mineral interests, and other O&G “interests,” which is not nearly as common among our peers. In a sense, this broad O&G industry capability isn’t much of a surprise considering our team has four individuals who’ve practiced business valuation for 20+ years in Texas.
What is unique about Mercer Capital’s oil & gas industry services/expertise compared to your competitors?
Probably the most unique aspect of our Oil & Gas Industry services is our expertise in appraising reserves, mineral interests, and other O&G “interests” (royalty, working, etc.). While there is any number of business appraisal firms that dabble in appraising these types of assets, unless the appraiser has real expertise, you can often end up with a somewhat questionable valuation. Our Oil & Gas Industry Team is a bit unusual, even among our larger peers, as to the depth of knowledge that we bring to appraising these assets. Knowledge of decline curves and the varying geophysics of different oil and gas basins is not a common body of knowledge in the Business Appraisal community, but we have that knowledge – in abundance.
What is the one thing about your job that gets you excited to come to work every day?
Early in my career, the exciting part of my job was certainly getting to understand what made the subject company tick. It was, and remains, fascinating to me. As I’ve moved deeper into my career, I’ve also grown to really enjoy many of the broader aspects of running a business valuation practice – such as working with our younger analysts to help them advance in their careers, growing our Houston and Dallas offices, continuing to grow and expand our presence in the Oil & Gas industry, and learning new technical skills as our profession develops more and more sophisticated methodologies for modeling value. Over time, I’ve come to realize that this career in Business Valuation — that I sort of fell into back in the early 1990s — really fits me like a glove. I thoroughly enjoy it and can’t see myself doing anything else.
