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.
Buyer beware! Start with good title
It’s always best to acquire onshore oil and gas assets with good title and good lease records, but this takes due diligence from the very start…way before the drilling program ramps up. It may even involve hiring an oil and gas due diligence team. Buyers who don’t initially invest in title examination and, if defects are found, do the curative work up front, find it more difficult and costly to establish defensible title and an organized paper trail later on. Proactive, thorough analysis by qualified land professionals provides peace of mind and assurance that you are in fact getting what you paid for – the represented working interest and net revenue interests, the correct depths on each lease, sufficient term remaining on the leasehold, leasehold in good standing, as well as many other considerations.
A land management program that works for you
Land management programs encompass many detailed (sometimes overlapping) functions, including contract management, meeting drilling and lease obligations, managing owner relationships, issuing proper and timely payments, curing title defects, obtaining permits, etc. Errors in such details can incur costs anywhere from a few hundred dollars for lease ratification, to tens of thousands of dollars to correct payment mistakes. But, at the end of the day, it’s about maintaining the integrity of your oil/gas/mineral interests and, in so doing, supporting the progression of the drilling program.
The high volume of leases and variation in contract terms that are typical of today’s positions require constant attention to prevent any number of issues that can lead to a loss of interest. Equipped with the best tools of the trade, workflows and resources scaled for your asset and time frame, a third-party can effectively conduct your land management activities …so you don’t have to. This kind of support streamlines your data gathering and decision-making by giving you greater transparency in to your asset and more confidence in the accuracy of your data. An effective land management program reduces uncertainty and friction in the development process while increasing your time to oil. That’s where a professional land management team, like Cinco, can add tremendous value during the maintenance and operation period.
When it’s time to divest
Assets need to be properly managed in all stages of engagement, from an oil and gas acquisition, to development, to divestiture. Divesting of assets is a particularly important time to have your house in order, land-wise. It is the seller’s responsibility to accurately represent the assets for sale, and deliver the title to support it; thereby, minimizing or eliminating defect-related costs and allaying buyer concerns. For all the same reasons stated above, this requires focused attention to a very detail-intensive process that can have legal and financial implications if not done right.
Why go it alone, when you can rely on experienced professionals for both the sale and acquisition side of oil and gas transactions? Considering these 3 factors and bringing the right expertise aboard could be make or break for your return on investment.