Haag J. The Acquisition & Divestiture of Petroleum Property: A Guide to the Tactics, Strategies and Processes Used by Successful Companies

PennWell, 2005. — 208 p. — ISBN 978-1-59370-045-4.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 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 due to excitement or fl awed 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.
This guide addresses the acquisition and divestiture of individual producing or discovered non-producing assets or packages of such assets. Pure exploration deals involving promoted wildcat drilling or primary term-lease trades are not reviewed since 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.
The myriad of complicated financial and legal factors that are investigated for corporate transactions beyond asset value are not discussed either, as the topics are beyond the scope of this text.AudienceGeologists
Landmen
Reservoir engineers
Evaluation engineers
Managers of acquisitions
Financial institutions
Oil and gas investors.