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Oil and Gas Due Diligence Checklist

Oil and Gas Due Diligence Checklist Template

Investing in or acquiring an oil or gas company comes with an inherent risk and potentially great reward. Due diligence is a crucial step in executing any transaction. It helps the buyer identify red flags and appraise the true value of an investment. Beginning due diligence can be greatly intimidating, but DealRoom professionals have crafted an Oil and Gas Due Diligence Checklist to help you navigate your next transaction in the energy industry.

Our checklist is:

  • Tailored for auditing and appraising targets in the oil and gas industry
  • Requests are prioritized to focus on the corporate, land, legal, environmental, and financial faceuts of the target
  • Checklists are customizable to meet the specific circumstances of your deal

What Tasks does the Oil and Gas Due Diligence Checklist Include

Corporate

Regardless of the target’s industry, it is important to look at it through a wide lens. Corporate Due Diligence is designed for you to gain a broad, yet deeper understanding of the target’s leadership, employees, and corporate structure. Items required in this stage include general company and employee information,  intellectual property documents, employee benefit and insurance plans, and organizational charts.

ITEMS IN CORPORATE DUE DILIGENCE INCLUDE:

  • List of organization executives, middle management, and employees
  • Business structure/organizational charts
  • Corporate policies, procedures, and handbooks
  • Employee agreements and contracts
  • History of employee issues, grievances, and lawsuits
  • Benefit plans
  • Confidentiality and IP agreements
  • Mission statement and values

Land

When executing an investment in the oil and gas industry, it is essential to scrutinize the Purchase Agreement and identify any potential issues. Additionally, Land Due Diligence is executed to confirm that the information in the Purchase Agreement matches with Lease and Well Exhibit. Performing Land Due Diligence will additionally help when assembling and distributing any Title Defect Notices. Items required in this stage include internal files, Lease and Well Schedules, Purchase Agreements and Schedules, Farmout Agreements, and Unit Declarations.

ITEMS IN LAND DUE DILIGENCE INCLUDE:

  • Internal file audit
  • List of land assets ranked according to value
  • List of asset identifications and their legal descriptions
  • Purchase Agreement exhibits
  • Purchase Agreement schedules
  • Terms of joint operating agreement(s)
  • Lease Exhibit
  • Lease Schedules
  • Well Exhibits
  • Well production and API numbers from the seller and state and regulatory databases
  • Consent and preferential right schedules
  • Title issues
  • Title opinions
  • Transfer issues
  • Current and historical reserve reports
  • Unit declarations
  • Farmout Agreements

Legal/Contracts

Prior to completing any investment, merger, or acquisition, you want to ensure that the target is respectable able and won’t come with an oppressive amount of legal issues. Auditing contracts will help you gain a better understanding of the scope of your deal. Items required in this stage include lawsuit data and final rulings, correspondences with auditors, license requirements, and Drilling Obligations.

ITEMS IN LEGAL/CONTRACTS DUE DILIGENCE INCLUDE:

  • Schedule of all lawsuits and threatened lawsuits
  • Settlements and final rulings from lawsuits
  • Correspondences with external auditors regarding lawsuit liability
  • Permit and license requirements
  • Drilling Obligations
  • Pugh Clauses
  • Area Dedications

Environmental

Some of the most controversial topics regarding the oil and gas industry are environmental concerns and sustainability. Performing Environmental Due Diligence will help you verify conformity with governing environmental laws, identify any hazards, and add to your appraisal of the target’s value. Items required in this stage include Phase I/Phase II Environmental Assessments, historical schedules of spills and leakages, aerial photographs, various samples from the property, and topographic maps.

ITEMS IN ENVIRONMENTAL DUE DILIGENCE INCLUDE:

  • Phase I Environmental Assessment
  • Physical inspection of assets
  • Conduct interviews with those who have knowledge of the assets
  • State and federal lists of recognized contaminated sites and hazardous materials
  • Historical schedule of spills and leakages
  • Aerial photographs
  • Topographic maps
  • Environmental reports and documents for assets
  • Findings from historial environmental audits and analyses
  • Phase II Environmental Assessment (if issues are uncovered during Phase I)
  • Soil, soil gas, and/or groundwater samples

Financial

Purchasing a company riddled with hidden or unknown financial liabilities is most investors’ nightmare. Financial due diligence aims to confirm whether a target’s cash flows and accounting practices are healthy and authenticate information shared by the seller in early-stage “teaser” documents. Items required in this stage include audited and unaudited financial statements, accounting policies and procedures, insurance policies, gas imbalances, and well payout statuses.

ITEMS IN FINANCIAL DUE DILIGENCE INCLUDE:

  • Accounting policies and procedures
  • Audited financial statements
  • Unaudited financial statements
  • Working interest expenses
  • Net revenue receipts
  • Contingent liabilities
  • Royalty and tax payments
  • Well payout status
  • Gas imbalances
  • Budgets
  • Projections
  • Cash management
  • Accounts receivable - aging
  • Inventory
  • Bad Debts
  • Reserves
  • Credit support obligations
  • Bank statements
  • Expense and suspense accounts
  • Planned capital expenditures
  • Insurance policies
  • Insurance claims summary
FAQ

Can I change requests in this checklist or add new?

Every M&A and due diligence process is different. Downloaders are urged to make these checklists their own by changing the providing information to better fit their needs.

Does this questionnaire provide all the necessary due diligence information?

This oil and gas due diligence questionnaire was created by and for M&A professionals and includes a comprehensive starting point for any diligence process. Every deal is different, however, and may require additional requests or diligence areas.
Easily Collect Data Using this Due Diligence Template in DealRoom
This oil and gas due diligence template can be easily downloaded and utilized as just the Excel sheet. However, it is most effective when paired with DealRoom’s due diligence software. We offer a secure space to conveniently request, collect, and house data. Additionally, DealRoom offers analytics, security features, and customized help to streamline the process. We are confident that with DealRoom you can close deals up to 40% faster.
How to use the template with DealRoom:
  • Download the due diligence template from DealRoom’s website
  • Open a room within DealRoom
  • Go to the Requests tab and select “import”
  • Import the downloaded template

The Requests tab is automatically populated with the requests from the due diligence template. Users can begin assigning, adding to, and completing due diligence requests.

Use DealRoom’s Premade Templates

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