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Valuation and Deal Structure

Engagement was with a large industrial company whose business requires as large volumes of dry natural gas over many years as part of its processes.   The client was considering purchase of natural gas reserves in the ground as a physical hedge against long term increases in the price of natural gas. Dan was engaged to help company evaluate alternatives ranging from purchasing royalty trust interests to working interests with producers.   The physical location of the client’s facilities and regulatory considerations led to an evaluation of deals in the south central U.S, including the Arkoma Basin, Woodford shale, Barnett shale, Haynesville/Cotton Valley, and Tuscaloosa marine shale.

The engagement included a review of deal structure, reserves and production purchased, and pricing of transactions undertaken by other large natural gas end users; other transactions in the area of interest; examination of prospects on a field by field, producer by producer basis; consideration of new reserve demand arising from Gulf Coast LNG projects; and reserve volume price elasticity.   The engagement resulted in a list of suitable target partners to be approached following management review.

Dan was able to call upon his deep experience and long relationships in the oil and gas industry to visit companies’ management, investment banking contacts, geologists, petroleum engineers, and industry regulators to develop an actionable plan for the client.