The Acquisition & Divestiture of Petroleum Property

Description

Learning how to successfully buy and sell petroleum property through trial and error is a costly lesson. In this text, seasoned veteran Jim Haag imparts to readers on both sides of petroleum property transactions, drawing on his more than 25 years experience in the discipline.

Learning how to successfully buy and sell petroleum property through trial and error is a costly lesson. In this text, seasoned veteran Jim Haag imparts to readers on both sides of petroleum property transactions, drawing on his more than 25 years experience in the discipline. Addressing the acquisition and divestiture of individual producing or discovered non-producing assets Haag, in step-by-step fashion covers the entire process so readers will understand each step in the process, know where that step fits in the overall transaction, and anticipate what will happen next.
Key Features & Benefits:
Case histories show how the author�s guidelines are applied in working transaction proposals
�Lessons Learned� chapter summarizes for readers how they can avoid common mistakes

Preface
Acknowledgments
Successful Company Factors
Motivating Factors
Non-motivating Factors
Seller Evaluation
Marketing Options
The Divestment Process
The Acquisition Process
Unique Lifecycle Risks
Valuation Methodologies
Determining the Price
Like-Kind Exchanges
New Field Discoveries
Constructing the Offers
Preferential Rights
Bonding Protection
Negotiating the Contract
Due Diligence
Government Approvals
Corporate Sales Programs
Industry Activity
Company Mergers
Accountability
Lessens Learned
Case Histories

This guide is intended to be a helpful tool for anyone who wants to understand the process of buying and selling producing oilfield assets. The decision to buy or sell a property, the evaluation methodology that is employed, the strategy used in the construction and delivery of an offer, and the aspects of effectively negotiating and closing a transaction involving the exchange of title to a producing property are abstract activities. It is an inexact science that is esoteric in nature and approached in a unique fashion by each company. Learning the concepts that are presented in this guide by the trial and error method can be terribly costly, and has indeed resulted in bankruptcy or forced merger for many companies.
Huge profits and losses occur throughout the industry as a result of the purchase and sale of petroleum property. The learning curve can be quite expensive and time consuming for buyers and sellers if the parties are not well versed in every phase of the process.
All buyers are cognizant of the winner�s curse, which is the unintended result of having the high bid for a competitively marketed asset, only to realize later that the price paid for the acquisition is so high that the transaction is not profitable. Inexperienced or unskilled acquisition teams who overpay because of excitement or flawed analysis can only hope that their company is large enough to withstand the error and that it is not repeated.
Most domestic producing fields are bought and sold many times before depletion. In the past 25 years, more than 6,000 domestic transactions valued in excess of $650 billion were announced publicly. It is obvious from these figures that huge sums of money are placed at risk regularly in acquisition and divestiture activity. Companies involved in this business must be experts in the principles that are presented in this guide to be successful.
Active companies optimize their portfolios by buying and selling property to meet business objectives. The expertise that is needed is invaluable and maintained as a core competency by those who are most successful. The ability of the team to merge geological, geophysical, engineering, land, legal, marketing, and financial data into a seamless analysis is just the first step. The information is then risked appropriately within what is generally a very tight time frame. Management presentations and bid strategy follow rapidly, culminating in the submittal of an offer. It is very gratifying to the participants when this high-energy effort concludes with a successful transaction.
This guide addresses the acquisition and divestiture of individual producing or discovered nonproducing assets, or packages of such assets. Pure exploration deals involving promoted wildcat drilling or primary term-lease trades are not reviewed, because the probabilistic evaluation of exploration assets is unlike the more deterministic evaluation of producing assets. Corporate-level transactions are not addressed either, although many of the concepts presented herein are the building blocks for the analysis of the producing assets of a corporate transaction.

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