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:
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:
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:
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:
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:
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:
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.
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.