Pipeline Equities
PO Box 571977
Houston, Texas 77257
Phone: 713-623-0690

Pipeline Recovery

excavation & removal

Damage Assessment

of easements

Pipeline Appraisal

pipeline property valuation

The Art and Science of Pipeline Valuation: Methods and Considerations

Pipeline appraisal is a complex process that requires a delicate balance of art and science to determine the true value of these critical assets. Various methods are employed by experts to appraise pipelines, each offering unique insights into their financial worth. To navigate pipeline valuation, we need to delve into the art and science of pipeline valuation, exploring the income, market, and cost approaches, and shedding light on the nuances and considerations inherent in each method.

The Income Approach:

The income approach to pipeline valuation focuses on the future revenue the pipeline is expected to generate. This method involves estimating the potential income from the pipeline over its lifespan and discounting it to present value. Factors such as expected throughput, tariff rates, and operational costs are crucial in this approach. Analysts must carefully consider the economic landscape, market demand, and regulatory environment to make accurate projections.

Nuances and Considerations:

Future Revenue Projections: Accurate forecasting of future revenue is paramount, requiring a deep understanding of market trends and potential changes in demand.

Discount Rate: Determining the appropriate discount rate involves assessing the risk associated with the pipeline project, considering factors like regulatory stability and economic conditions.

The Market Approach:

The market approach compares the pipeline being appraised to similar recently sold pipelines. This method relies on the principle of substitution, assuming that a buyer would pay no more for a pipeline than the cost of acquiring a similar one. Market transactions provide valuable benchmarks for valuation, considering factors such as pipeline size, location, and operational characteristics.

Nuances and Considerations:

Comparable Transactions: Identifying truly comparable transactions is a nuanced task, as pipelines can vary widely in terms of size, age, and operational context.

Market Timing: The timing of market transactions is crucial, as the energy market is dynamic and subject to fluctuations that can significantly impact valuations.

The Cost Approach:

The cost approach assesses the value of a pipeline by estimating the cost of replacing it with a similar one at current market prices. This method considers the cost of reproducing the existing pipeline and the value of the land it occupies. While straightforward in concept, the cost approach requires a meticulous analysis of construction and material costs and considerations for depreciation.

Nuances and Considerations:

Depreciation Factors: Calculating depreciation accurately involves considering physical deterioration, functional obsolescence, and external obsolescence.

Land Value: Determining the value of the land is critical, as it can significantly impact the overall appraisal.

Expertise in forecasting future revenue, identifying comparable transactions, and accurately assessing replacement costs is essential. In the ever-evolving energy landscape, pipeline valuation remains a dynamic field where the mastery of both art and science is indispensable for making informed and precise assessments of these crucial assets.

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Pipeline Recovery Manual

A complete guide to the business of recovering out of use pipelines

Sign up for our free newsletter to receive your complimentary copy of our Pipeline Recovery Manual that explains our entire process for recovering or salvaging idled or abandoned pipelines.

You will see how we deal with landowners regarding notification and recordings. How to draft a contract of sale with models by: Exxon, Texaco, Koch and others and pictures showing actual work in process.

The manual shows Pipeline Equities job references, right of way releases, agreements and the history and background of Pipeline Equities and managing partner David Howell. These references touch on parts of the six million feet of line removed or handled by the company over the past twenty years.

A line pipe table describing various weights, grades, and pressure ratings of ERW and seamless line pipe is included. This section is an indispensable tool for anyone doing operational word with line pipe.

Also included are extensive glossaries of pipe, pipeline, and right of way terms.

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Pipeline Appraisal Handbook

The Definitive How-To Guide on Establishing Values for Pipelines

This handbook written by David Howell, managing partner of Pipeline Equities is the basic text of any pipeline valuation. All of the essential factors for establishing the value of a pipeline are discussed along with exclusive proprietary formulas and tables essential to a certified appraisal.

Also included are 32 pages of pipe weight and grades tables that cover virtually any situation which might be encountered regarding line pipe requirements. Additionally you’ll find an extensive glossary of pipe, pipeline and right of way terminology is part of the Handbook.

Subjects include: Replacement, Right of Way, Surface Inventory, Throughput, Salvage/Recovery, and comparable sales histories to name a few of the basic factors of pipeline appraisal.

The author recognized a need for a report or “how to” manual for properly appraising pipelines and pipeline right of ways. Currently the work is being done by accounting firms, engineers, and real estate appraisers.

This handbook draws from 45 years of experience.

Howell has forty-five years experience in many sectors of the petroleum industry from drilling contractor and oil and gas operator to pipe and supply distribution throughout the world. He has published Tradex Equipment magazine, the Whole World Oil Directory, and the Texas Oil Register.

For the past twenty years, Howell has been almost exclusively engaged in pipeline sales and acquisition, appraisal, removal for salvage, environmental remediation and general pipeline operations.

Howell currently serves on board of the Pipeline Appraisal Institute and is a member of the International Right of Way Association. Howell is a graduate of Texas A&M University – Kingsville and a native of Alice, Texas. He is currently residing in Houston and is the managing partner of Pipeline Equities.