Executive Summary The Issue: Companies are facing cash shortfalls as they struggle to reopen from the COVID-19 lockdown.  Companies facing short-term liquidity challenges can seek new cash sources, such as the government’s Payroll Protection Program “PPP” or a bank line-of-credit.  However, certain companies may never achieve the revenue and profitability necessary to remain viable as…

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ValueScope, Inc. is excited to announce that Tom McNulty joined the firm on April 27, 2020 as a Principal and Managing Director who will launch our Houston Office.  Tom’s responsibilities include financial consulting, valuation analysis, transaction and dispute advisory, and expert testimony.  In addition to serving as the Managing Director of the Houston office, Tom…

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It has certainly been a rough couple of weeks with the recent fall off in the stock market and the shutdown of many businesses, but there may be a silver lining for people who intend to gift in the near future.  The recent decline in market valuations provides an opportunity to gift at lower values,…

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In financial markets, infrequent or rare events are referred to as “Black Swan” events.  The term “Black Swan” was popularized by Nassim Nicholas Taleb in his 2007 book, The Black Swan:  The Impact of the Highly Improbable.  Taleb describes Black Swan events as possessing three key attributes: Extremely rare Severe impact Obvious in hindsight Such…

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Following are excerpts of some of the key energy “themes” for the US in 2020, taken from a recent CreditSuisse energy research report [1]: E&P companies are evolving from growth-oriented to more capital disciplined and free cash flow generating entities; [2] Utilities will continue to transform into a lower-carbon and higher tech industry as renewable…

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What is Information Asymmetry? In 1970, George Akerlof, an economist who is currently a professor at the McCourt School of Public Policy at Georgetown University, released what is now a famous paper, “The Market for Lemons: Quality Uncertainty and the Market Mechanism.”[1]  The paper examines the market for used cars, and the impact that information…

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The oil price crash of 2015 and 2016 naturally led to numerous financial difficulties for many oil companies.  Following a partial rebounding of prices, oil companies rushed to produce by borrowing significantly.  This has led to a “debt wall” with scheduled maturities rising sharply over the next few years.[1] Many companies will have difficulty paying…

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Investors and operators are now required to consider a portfolio of aging wells that have been drilled, but uncompleted (“DUCs”).  Delaying a completion of a previously drilled well, by as many as four years, has “little effect” on the initial production level, according to a new study by US Energy Information Administration (EIA). The study…

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During the second quarter of 2019, the U.S. economy grew at an annual rate of 2.0% over the prior quarter.  Household spending has been a primary driver of growth, and the economy continues to perform strongly despite slowing global growth and headwinds from trade disputes. Overview of the U.S. Economy According to the third estimate…

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The Tax Cuts and Jobs Act of 2017 (the “TCJA”) was a complicated piece of tax legislation that mostly decreased taxes for individuals and corporations.  However, the net effect on an individual (or corporation) is dependent upon the unique circumstances of that individual. With respect to individual taxpayers, marginal rates were lowered somewhat from 39.6%…

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Remember that Little Bombing Incident in Saudi Arabia? Last month, two of Saudi Aramco’s oil production plants were attacked with a combination of twenty-five drones and missiles.  The sites hit, the Abqaiq and Khurais oil facilities, impacted Saudi production by 5.7 million barrels per day of crude [1]. This disruption in supply caused Brent Crude…

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Was Natural Gas the Fuel for Jerry Jones’ $90 Million Bet on Zeke?   This last month, Jerry Jones, owner of Comstock Resources and the Dallas Cowboys, entered into a six-year, $90 million contract with running back Ezekiel Elliott, financed in part by natural gas.1  Jerry Jones was quoted as saying that, “the way you…

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A Review of the Risk Premium Method for Regulated Electric Utility ROEs Energy ROE In utility financial economics, the cost of capital, or rate of return, is the cost of an electric utility’s invested funds, both debt and equity. The cost of equity capital is the rate of return that common shareholders require on their…

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Natural Gas Producers Woes Continue Two natural gas-focused E&P companies are now down approximately 95% over the last five years. Driven by the over-supply from Permian Basin development (focused on oil, where natural gas is merely a byproduct). 5-Year Stock Performance: CHK (Dark Blue) and RRC (Light Blue) More recently, over the last 3 months,…

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Family Therapy: Parent-Child Issues in Shale Basins A recent Society of Petroleum Engineers’ article1 focuses on the disparities in production between parent and child wells in US shale basins, and its impact on the ability of operators to maintain high levels of output over the next few years. However, Doug Suttles, Encana President and Chief…

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