Acquisitions & Divestitures, Due Diligence

Negotiating and executing oil and gas transactions are never simple endeavors. Transactions require careful analysis and decision-making on a range of issues to ensure you are making a deal that satisfies your objectives.

It is not always feasible to gather internal resources to support the oil and gas acquisition or divestiture process, particularly around title due diligence. Most deal terms provide for a relatively short due diligence period, thereby requiring a dedicated group of experts to examine the assets ahead of closing. Hiring an external party to get the job done will most likely be a necessity. When that occurs, it is important to know what you don’t know.

Here are some keys to getting the most value out of your title due diligence team:

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Acquisitions & Divestitures, Due Diligence

When the stakes are high with oil and gas acquisitions—and they always are—you need a rigorous due diligence process performed by an experienced firm to avoid driving up costs or taking too much time. This specialized analytical process, when done correctly, will help uncover potential risks as well as opportunities, while also helping to prevent investment errors or miscalculations.

Smart, money-saving questions

You can’t afford not to ask certain probing questions for vetting purposes when deciding who to hire as your oil and gas due diligence team. You’ll be surprised by what is revealed during this “due diligence” exercise.

Here are the top five:

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Due Diligence

When conducting an acquisition due diligence review, it is important to understand the terms and conditions of the purchase, and the affect that the terms and conditions will have on the review. The definitions section of the Purchase and Sale Agreement (“PSA”) will define such terms and further guide you on how to effectively conduct your review. Terms such as pertinent dates, how to calculate net acres, excluded assets, title defects, and encumbrances are just a few items defined in this section of the PSA. When conducting due diligence, it is important to understand these definitions up-front, as the way they are defined will dictate how downward adjustments to the purchase price are applied.

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