An organized and executed due diligence review is key to successful oil and gas properties and minerals acquisitions. There are many aspects of a due diligence review including title work, operational analysis, reviewing outstanding litigation and environmental issues, and potential accounting issues. Martindale can help evaluate a potential transaction by performing cut-off or post-close cost reviews and settlements from a joint venture or “COPAS” standpoint, review existing operating agreements and accounting procedures, and analyze outstanding joint venture audit claims.
Whether an operated or non-operated property, understanding the unique language or provisions in an operating agreement or accounting procedure is critical to being able to properly implement the agreements and understand what costs can and cannot be charged. Also, companies need precise and clear language in their Purchase and Sale Agreements (PSA) detailing how certain types of costs should be handled:
- How are outstanding audit claims to be resolved and which party receives credits?
- Which party has joint interest billing and revenue audit rights for the pre-effective date period?
- Is the PSA language clear enough as to the cut-off dates for costs and revenues?
- There will likely be transitional accounting performed; is the PSA language clear enough as to the specific dates and time periods each party pays costs and is entitled to revenues?
Other oil and gas acquisition components where Martindale’s experience and expertise can assist:
- Ensure oil and gas revenues materially reflect actual sales transactions.
- Verify oil and gas production reported represents actual production.
- Determine potential royalty-related liabilities on Federal and states leases.
- Analyze high volume vendors, affiliates, and related-party transactions.
- Review fee royalty lease payment provisions and liabilities.
Make Martindale part of your oil and gas acquisitions team to ensure you have the COPAS and joint venture and revenue accounting expertise necessary to effectively execute and implement your acquisition.