At its most basic level, oil and gas title due diligence seeks to protect your investment by confirming that the represented interest in a given property as well as any valued potential upside are accurately portrayed. No two deals are the same, and similarly, due diligence should be tailored to meet the specific objectives of the management team. How you perform due diligence is as important as why you should conduct certain types of due diligence.
There are many reasons a company may choose to outsource land work, ranging from a lack of bandwidth to a new startup without a land department. Land management companies can plug into your existing company structure, or provided independent land oversight and management. Here are the top advantages of outsourcing your land work.
The San Juan Basin offers many investment opportunities, as it contains the largest coal-bed methane field in the world and ranks second in total gas reserves. This spotlight provides geological facts, current activity and things to know beforehand.
The first oil well in the San Juan Basin spud in 1911, and since then over 40,000 wells have been drilled. Drilling activity was steady from the 1990s until 2008. In 2007, there were over 40 active rigs. Then attention turned to the prolific Marcellus, where gas could be extracted less expensively. In the past 12 months, 135 wells were completed in the Basin. The leading players include BP America, Hilcorp Energy Company, Catamount Energy Partners, and Encana Oil & Gas.
We understand the importance of accurately securing mineral rights. A sound development plan, includes verified ownership of the leased minerals. Most companies decide to: (1) either acquire the minerals outright (owned in fee simple) and let other operators lease and pool their minerals into their development programs, or (2) lease the minerals from the various owners in the locations and formations of interest. In either strategy, correctly identifying the mineral owners is key to the development process.
Below we’ve compiled the most common questions about the oil and gas leasing process.
As veterans in the oil and gas industry, we know that learning the terminology is vital to navigating lease acquisitions and interpreting title research. Whether you are a newcomer or well-versed in the business, there is never a shortage of learning opportunities. At Cinco, we enjoy providing community and client education on the varied dimensions of land and title work. We’ve compiled a selection of terms and brief definitions to conveniently help you refresh your knowledge.
When you are actively pursuing an opportunity in the oil and gas industry, whether it’s making an investment in an E&P company, buying minerals rights, or acquiring leases, having access to the right information and the right team to execute is critical from a value and timing perspective. While land management companies provide a multitude of benefits to the market, here are six greatest advantages they offer.
Title due diligence in certain transactions may seem like an onerous part of the deal, causing some to speed through it and overlook critical issues. Your due diligence process is the most effective insurance policy against title busts and loss of mineral value. However, in our experience, we have seen some big mistakes made by mineral buyers that generate big regrets down the line.
Here are four big mistakes we see made all too often:
- Overlooking Location-Specific Risks
- Not Getting the Executive Rights or Other Rights to Lease
- Acquiring Partial Rights Only
- Skimping on the Diligence
Successful dealmakers and investors understand the value of getting the right information to evaluate a new opportunity. Likewise, in the oil and gas space, having a solid understanding of a prospective investment play will enhance the quality of the assumptions and help set realistic expectations. This is particularly true when it comes to mineral title, land title and other regional title issues. An informed buyer will always conduct an assessment of title complexity, potential ‘red-flag’ issues, and the length of time it will take to confirm title.
Questions that should be asked, for example, are:
- How old is the title and what kind of access information will you have to work with during due diligence?
- What are the costs associated with title due diligence and title curative?
- How hard will it be to obtain fill-in acreage or hold on to your acreage post-acquisition?
For energy professionals and investors with limited experience in the business of oil and gas land management, the details can seem daunting, or worse, be treated as an “afterthought” to other steps in the E&P value chain. The simple truth is, diligent upkeep of your land and title matters will pay great dividends, both in the short and long term. Poor land management, on the other hand, can lead to loss of acreage, interference with operations and, ultimately, put you at a disadvantage when it’s time to sell your oil and gas assets.
The following three factors help extract maximum value from an E&P investment:
1) the quality of the title you acquired,
2) the efficacy of your asset management program, and
3) your divestment readiness.