Due Diligence in Oil and Gas Business Acquisition

The oil and gas market is a highly dynamic and volatile industry. Due diligence is a process that can be applied to all aspects of the oil and gas industry, including acquisition and divestiture decisions, asset production and value analysis. Due diligence is scrutinizing prospective assets to protect the parties to the transaction, ensuring that the acquired assets meet all financial, legal, and technical requirements. Before any acquisition occurs, every aspect of the company being purchased must be examined from top to bottom. The importance of properly understanding the company you are evaluating cannot be underestimated. You could lose your investment or fail to make profits if proper due diligence is not performed before an acquisition or divestiture decision.

What are the steps in the evaluation of the assets to be acquired?

Though every process of due diligence is unique, it is also quite extensive. Due diligence is performed both before finalizing the purchase agreement and after the closing. A buyer’s due diligence process often starts before a purchase agreement is signed in the oil and gas business. How much research a company should do before signing an agreement will depend on many factors, including the size of the acquisition and the seller’s level of cooperation. Due diligence in oil and gas business acquisition is the ongoing process of examining a potential transaction’s business operations to verify that it is worth buying. The goal is to discover and address problems before signing a binding contract when it may be difficult or costly to back out of the deal. It can include anything from examining financial documents and reviewing sales brochures to visiting the site of an asset, performing land due diligence, environmental due diligence, and much more.