Course dates
A 3-day intensive course exploring how upstream oil and gas assets are traded from both buyer and seller perspectives.
The course will include references to failed and successful deals and provide valuable insight into how to conclude successful transactions.
Course Objectives:
- To understand how upstream oil and gas assets are bought and sold
- To gain an insight into all the various types of upstream transactions
- To understand the key influences on asset values
- To see how a seller can maximise both the value and chance of completion
- To learn how a buyer can maximise its chance of buying assets without over-paying
Upstream Oil and Gas Acquisition and Divestment Course Overview
This course explores how upstream oil and gas assets are traded from the perspective of both the buyer and the seller. The principles of asset portfolio management are explored along with issues surrounding asset evaluation (reserves and resources) and tools to derive economic value and risk management. The principles of Licensing Rounds, Farm In and Farm Out processes are explored as well as key industry processes underpinning these transactions.
The Course includes assessment of case studies and includes an element of group work based on an “acquisition and divestment opportunity” where buyers and sellers meet to consider an opportunity and to “close a deal”.
Day 1
Overview of the upstream oil and gas sector focussing on exploration, development and production assets and the fundamentals of how these assets are traded.
The oil and gas life cycle
- Government licensing and production sharing agreements
- Exploration; finding hydrocarbons
- Appraisal: defining the resource
- Development; design, build and commissioning the infrastructure. Commercial agreements covering production, processing, and transportation, allocation and sales
- Production; getting the hydrocarbons to market
- Re-development; oil and gas reservoirs have a life cycle, a producer will need to consider investments to maximise recovery and return on investment
Types of transactions
- Understanding the private and public processes for oil and gas asset transactions; exploration farm outs, development farm-outs, corporate and asset deals, buying from administrators, Government transactions.
Triggers for transactions – both buyer and seller
- Why buy or sell assets? Discussion on trigger points including portfolio management, infrastructure and commercial synergies, corporate cash flow, technical expertise and risk and geopolitical considerations.
Case Study 1: Each team will review an asset sale/purchase opportunity defining core strategic drivers, commercial consequences and preliminary consideration of asset value.
External influences on transactions
- Asset partners: including negotiating and working with a Joint Operating Agreement (JOA)
- Governments: including consideration of exploration obligations, asset development timing, tax and overall political risk
- Regulators: lobbying, industry bodies
Key valuation drivers
- Describing asset value from both buyer and seller perspectives
Group Exercise 1: Discuss key influences on assessing asset value including consideration of economic tools, capital, operating and abandonment cost estimates and discounting.
The ‘Negotiation’ Exercise 1
- Introduction to the exercise for negotiating a ‘Heads of Agreement’ between a team of buyers and a team of sellers. This exercise will run through all 3 days of the course
Day 2
The divestment process - overview of divestment strategy and drivers. Defining and understanding the market environment, optimising the sale process and timing.
Preparing the asset for divestment
- Asset or corporate sale?
- Shaping the offering for market including development of key ‘industry’ documents including the Executive Summary, Confidentiality Agreement and Information Memorandum
- Preparing a clean data set for buyers to study. Use of online and physical data rooms.
- Engaging with the ‘right’ buyers and avoiding the ‘tyre kickers’
- Develop a bidding strategy and value mandate with management
The 'Negotiation' Exercise 2
- Team work. Developing the initial position
- First Negotiation, feedback and reaction
Creating and managing a competitive deal process
Soliciting offers, public versus private marketing, in-house marketing versus broker houses
Analysing bids, short-listing, consideration of any conditions precedent, buyer risk, completion timing....
Negotiating and signing the SPA
Handling 3rd parties; including partners, regulators and government
The 'Negotiation' Exercise 3
Produce draft Heads of Agreement
Day 3
The acquisition process: Description and analysis of the preparatory work required to ensure the ‘right’ assets are targeted for acquisition
Engaging with sellers
- Internal approval and mandating. Source of funding. Consideration of swap deals
- Advertising your strengths as a buyer including an assessment of likely competition
- Confidentiality and information flows
Valuation processes
- Initial quick look to prioritise appropriate asset opportunities
- Stop or keep going?
- Detailed due diligence on all technical and commercial aspects of the asset
- Understanding the risks
Making the offer
Group exercise on offer letter: Each team to develop an offer letter describing the key components of the offer including cash, conditions precedent, exclusivity, process and timing
Closing a deal
- Negotiating the Sales and Purchase Agreement (SPA) including key commercial terms
- Resolving 3rd party issues
- Completion process
- Lessons learned
The 'Negotiation' Exercise 4
- Final negotiations
- Complete Heads of Agreement and present
Central London Hotel (energy), London, UK
All Euromoney Energy Training courses are held at four or five star venues in Central London, Zone 1. We strive to provide you with a training environment of the highest quality, to ensure that the whole learning experience exceeds your expectations.
Your training venue will be confirmed by one of our course administrators approximately 3-4 weeks before the course start date.
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Nick Hooke
Nick has nearly 30 years of oil and gas experience, gained around the world through working in and advising large operating companies including Esso and Conoco. He is a Petroleum Engineer by training, and after a variety of technical roles in the North Sea and internationally, he progressed into commercial and strategic positions.
For the last 13 years he has been a director of a multidisciplinary strategic consultancy, which he founded. During this time he has managed a number of successful acquisition and divestment projects around the world.
Nick has a BSc in Civil Engineering, MSc in Petroleum Engineering and is a Chartered Petroleum Engineer, Fellow of the Energy Institute, Member of the Society of Petroleum Engineers and a Member of the Institute of Directors.
Interested in holding this course in-house? Please fill out your details and a member of our team will be in touch with more information.
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