The ITG Valuation Approach

An oil and gas producer is worth the present value of its current production plus upside development opportunities. When valuing a company, we start with every well a company operates and add specific upside opportunities based on its actual land holdings.

Similar to the process undertaken by a potential acquirer or third party engineering firm, our team examines the assets through raw data upload and interpretation as well as comparisons to analogues and technical papers. These steps enable us to independently verify a company’s resource base and gauge the likelihood of an unexpected reserve writedown.

We weigh several factors when we assess upside valuation, including leasehold (and the portion amenable to development), spacing and activity level. Our fundamental analysis culminates in a type curve for each of the company’s growth prospects. Once we determine the economic viability of a representative sample of wells, we compile capital, lease operating expenses, debt and regulatory burdens to evaluate the quality of a company’s prospect inventory.

Our clients receive copies of our models in order to run their own sensitivities.