Advising on oil & gas transactions
The falling oil price as usual focuses attention on how to get transactions executed most efficiently at the best value and often at the lowest cost. This article explores why a lawyer specialising in oil & gas M&A and investment transactions does a better job and costs the client considerably less than a generalist with some experience. The value add, cost saving and the efficiency differential is amplified further if the lawyer has substantial commercial experience gained within the industry because they are much more able to better appreciate the value and practical implications of all aspects of the transaction.
A specialist oil & gas lawyer should have deep industry knowledge from both a legal and a commercial perspective. They should instantly understand the many common acronyms and jargon of the industry as well as the processes that investors, buyers and sellers use as second nature. They will have a specialized appreciation of all the different types of oil & gas assets and be familiar with the nuances of upstream, midstream, and downstream assets, including tax/royalty concessions, production sharing agreements, service contracts, joint operating agreements (JOAs), and financing structures.
Their regulatory expertise will allow them to quickly navigate the complex web of local and international regulations, environmental laws, and licensing frameworks specific to oil & gas, focus on identifying potential transaction bottlenecks and blockers and quickly provide tried and tested solutions.
They will quickly be able to identify both major and nuanced risks and mitigate them in the most efficient way for a given client. An oil & gas transaction involves risks that are not common in other industries such as joint venture risks, decommissioning liabilities, commercial arrangements, government control and back-in rights, hydrocarbon pricing exposure, and geopolitical risk in frontier jurisdictions. A specialist can identify and address these faster and more effectively as they know where to look in long and complex documents and legislation and will be familiar with tried and tested mitigation strategies and industry norms.
They should also have a high level of commercial awareness and market practices. Specialists understand standard deal terms, market rates for royalties, carried interests, farm-ins, joint venture issues and so on. This familiarity will give clients a commercial edge in a navigating a transaction because it assists a client’s negotiation leverage. Their experience allows them to predict what counterparties will likely accept or push back on, making negotiations more efficient.
Furthermore, they are able to undertake faster and more efficient due diligence. A generalist will need time to learn the sector’s terminology and key issues, and may fail to appreciate the significance of certain issues. A specialist can go straight to the material points and propose workable solutions, reducing time and legal spend.
As an added bonus, experienced oil & gas lawyers often have relationships with regulators, local counsel, technical advisors, and industry players, which can help to streamline deal execution.
Finally, many deals involve ongoing issues post-closing, such as joint venture disputes, especially in relation to compliance issues, financial adjustments or operations transitions. A specialist is better placed to handle these seamlessly.
Ogilvy & Wachtel’s partners together have nearly 100 years of experience in advising super majors, mid-market and junior clients on international oil & gas public and private M&A and financing transactions and disputes. Unlike many firms, we do not rely on “corporate memory” for our track record. Our partners are the practitioners who have advised on the transactions on our resumés at top tier international law firms and blue chip companies.
