Equipment Appraisal Blog | Understanding Machinery Appraisals

Uncertainty in the Oil & Gas Drilling Markets Affects Equipment Values

Posted by Equipment Appraisal Services on Mon, Jul 26, 2021 @ 08:00 AM

Machinery Equipment Appraisal Oil Gas Fracking

Look Far and Wide and be Patient Before you Liquidate your Machinery & Equipment

Given the sharp downturn in the oil and gas field production industry during the last couple of years, with energy companies dealing with low market prices and oversupply, it is difficult to imagine the market ever returning to the boom days it enjoyed in the past. With many drilling and service companies currently sitting on their equipment, waiting for some positive news, it may seem like there is no light at the end of the tunnel.

Hydraulic fracturing or "fracking" as it is commonly referred to, is a process of drilling and then injecting water, sand, and chemicals into the earth, where the rock, or shale, below is fractured and, as a result, releases oil and gas. This industry has been heavily regulated, and, although it produces natural gas which is considered "cleaner" than coal, it has been harshly criticized for various health and safety reasons, among others.

The early results of fracking led to an oversupply of energy sources in the US, Canada, and various overseas countries, however, the resulting issues included a sharp drop in oil prices along with many energy services companies taking huge losses given all the costs and penalties of doing business.

If you own or work for a company that services the oil and gas fields where fracking was commonplace in the past but has since dried up, it may be time to complete an updated equipment appraisal on your equipment and begin to look outside your local resale markets to potentially sell some of your excess inventory of assets. There are still pockets in North America as well as overseas where the oil and gas markets remain active, and you may be able to find an opportunity to receive a fair price for your equipment.

As an alternative to liquidating through an auction service or sitting idly by while the uncertainty grows in this industry, you may want to consider engaging in a longer-term hybrid plan of selling what you can at fair prices and paring down your business to a more reasonable level, in anticipation of some kind of upward market turn in the months to come.

These market fluctuations can be severe in the oil and gas industry, and maybe no more so than it is experiencing at present, however, historically, there have always been changing economic developments over the years which turn things around when you least expect it.

Along the way, consider obtaining an updated equipment valuation from an independent accredited machinery & equipment appraiser who can provide realistic values on your assets without the additional agenda of trying to assist in your resale effort.

Tags: machinery & equipment appraisal, accredited appraisers, Oil & Gas Industry Assets, oil and gas equipment

What Happens When Oil & Gas Industry Equipment is Appraised?

Posted by Equipment Appraisal Services on Mon, May 13, 2019 @ 08:00 AM

oil & gas industry assets

When you work with petroleum, your equipment works just as hard as you do to get the job done. But have you ever considered what that equipment is actually worth? The process of appraising oil & gas industry equipment can be a complex process, but it follows standardized methodologies to calculate a value that is accurate to your specific equipment. Here's a look at how the process of appraising petroleum equipment works.

What Happens When Oil & Gas Industry Equipment is Appraised?

When you're having your oil & gas equipment appraised, there are a wide range of options that are considered while the value is being calculated. To start, you'll want to work with a certified equipment appraiser who has experience appraising machinery that is used in the oil & gas industry. This means that they're already familiar with that machinery, making it much easier to get the results of your appraisal more quickly. 

The first step in the process happens when you contact the appraisal company and are connected with an appraiser who has experience in your industry. Once the appraiser returns the contact, they gather information from you about the equipment that you need to have appraised. Having that information available at the time of contact will make this part of the process go much more quickly. That information should also include the year of manufacture, the manufacturers, the models and any accessories, kits or options that were added to the equipment.

After the appraiser has gathered this basic information, they can begin to look into further details about each piece of equipment. They can determine the usual useful lifespan for that equipment, what it tends to sell for on the open market, any particular issues that it commonly has issues with and what the current demand is for that machinery. 

Once this step is complete, the appraiser will take a solid look at the equipment itself. They'll look for signs of abuse, records of maintenance and repairs, potential issues or points of failure that are showing up, wear and tear on the equipment itself. They'll consider how long the equipment has been in use compared to the usual length of time that it tends to usually last in the field. This information all ties into the final value that is calculated on your equipment.

Following the gathering of this information, the appraiser uses a set of standardized methodologies to determine the value of your equipment. These methodologies have been tested over decades of exposure in courts of law, financial circles, insurance claims, tax agencies and machinery sales. This means that the information will provide you with solid information to base your company's future decisions on, decisions that can make or break your company if they're not made properly. 

Your company's oil & gas industry equipment is a big part of your company's assets, so taking care of those assets by maintaining a solid calculation of those assets' value helps you keep accurate books. This, in turn, gives you the information you need to make smart decisions when the market is unstable or new opportunities present themselves. Without this information available, you may end up making decisions based on inaccurate books, which can put your company at serious risk. However, it's important to work with a certified equipment appraiser who has experience in your industry.

Tags: Oil & Gas Industry Assets