UK: Making Informed Decisions: Oil And Gas Transactions Services

Last Updated: 4 March 2009
Article by Deloitte Energy & Resources Group

Most Read Contributor in UK, August 2017

In order to help you keep ahead of the fast moving oil and gas M&A environment we have tailored an independent and robust due diligence service to provide you with an industry focused key issues report early in the transaction process. It will focus on identifying key value drivers of a proposed acquisition to allow the Board to make a fully informed decision.

Our oil and gas team specialises in upstream M&A and capital markets and offers a truly differentiated service to deliver maximum value to your decision making process.

We enclose our team contact details and look forward to developing our relationship with you in the future.



The last couple of months have witnessed a step-change in the oil and gas M&A climate. With the oil price dropping by over 60% and share prices of oil and gas companies significantly declining, there has been a noted increase in the number of acquisitions with rumours of new bids arriving on a regular basis. The table below outlines recent transaction activity.

Impact Of Recent Oil Price Reductions On Share Prices

Commentators have stated that the market capitalisation of a number of companies has fallen by such a degree that they are trading at a steep discount to their risked NAV. This position, combined with the following factors has resulted in a climate in which well funded companies are seeking to extend their asset portfolio through corporate acquisitions.



The current M&A environment has spurred the directors of independent oil and gas companies into considering a number of options that could maximise shareholder value. In assessing these options the directors are often required to base decisions on limited, publically available information in a constrained timeframe.

Deloitte has developed a tailored due diligence service which generates specific oil and gas industry related key issues in a concise report format, so as to assist the directors in assessing potential transactions. It is anticipated that this report would be produced in c.2-3 weeks to enable the directors to react to current market conditions in a timely manner.

Value Drivers

There are a number of key differentiating factors that distinguish our service from the capabilities of the internal resources of the company or other diligence providers:

  • Deloitte's Petroleum Services Group have the ability to generate comprehensive reports focused on oil and gas activity at a field, block, company and regulatory environment level;
  • Deloitte's geographical spread and extensive resources can be mobilised at very short notice to react to your needs;
  • we have expertise in assessing the operational and financial impact of environmental issues and decommissioning liabilities;
  • we have a financial due diligence team exclusively focused on the oil and gas market; and
  • the product delivered will be an integrated, concise report customised for each client to better inform the directors prior to the investment decision making process.



The licence block analysis section will be led by Deloitte's Petroleum Service Group ('PSG'). This group includes geologists, geoscientist, petroleum engineers and IT (esp. Geographic Information System) specialists and has been serving clients for over 30 years. PSG has a global presence in the oil and gas industry continuously collecting and analysing up to date asset information.


The PSG provides information to answer client needs such as:

"we require reserve and production data for 5 specific Malaysian fields..."

"can you provide a review of an upstream company's global assets by licence and field..."

"we would like a map for an Egyptian basin detailing the block boundaries and field outlines."

Value Of Licence Block Analysis Section

PSI detailed knowledge and experience provides unique insights into M&A and deal activity.

Data from this section will assist the company in further refining its valuation model.

A focused overview of technical aspects of assets would further inform directors on benefits/risks of target.

PSG maintains a global database of oil and gas activity which provides the basis for insightful analysis on the target company's assets.

The licence block section will focus on the following areas:

  • licence information including participants in permits, award/expiry dates and licences under application;
  • key terms of licences/concessions including outstanding licensing commitments;
  • key terms of production sharing contracts (PSI) and technical assistance contacts (TACk);
  • farm-in terms where appropriate and available;
  • technical information on wells and fields including summary of infrastructure;
  • high quality graphical output (customised maps and images);
  • asset by asset production profiles and historical opex levels per barrel where information is available;
  • custom analysis tools – SQL, well success ratios, creaming curves, etc;
  • a review of fiscal regime and regulatory environment; and
  • identification of competitors operating in similar areas.



The environmental and decommissioning assessment will be led by Deloitte's environmental team, working with PSG. This combined capability includes specialists in their field who understand the linkage between the regulatory/technical basis of liabilities and their financial/accounting implications.

This part of our assessment will focus on the impact of liabilities associated with decommissioning and environmental clean-up of on and offshore facilities to include:

  • uncertainties in the scope of liabilities with respect to licences/permits conditions, legislation, international agreements and consultation with regulators;
  • an assessment of the underlying assumptions on which expenditure estimates have been calculated;
  • uncertainties in field economic life and the decommissioning/clean-up programme to define the timing of expenditure; and
  • accounting treatment of the provision and P&L charges.
  • our initial analysis will be based on publically available information, including that held by our PSG. Further detailed analysis will be undertaken as the transaction proceeds and access is granted to the target.

Value Of Environmental And Decommissioning Section

Provides information to inform directors' understanding of the nature of the liabilities.

Factors in the quantum and timing of expenditure in to valuation models.

Allows you to understand uncertainties in the scope of liabilities and associated cost estimates to sensitise valuations.

Case Study

The Deloitte environmental team undertook due diligence on environmental clean-up liabilities on a global portfolio of assets for an oil and gas super-major in support of an insurance recovery project. This included presenting technical information on the nature of the liabilities and analysing the basis of future cost estimates to discharge the outstanding liabilities and uncertainties associated with them.



The tax advisory and structuring services will be led by Deloitte's UK upstream oil and gas tax team which has an extensive track record of transaction and other tax advisory work and is the leading tax team in the sector. Areas of expertise include:

  • corporate mergers, acquisitions, disposals and joint ventures;
  • asset acquisitions, disposals and swaps;
  • debt and equity raising, including IPO related advice and structuring; and
  • general tax advisory work with regards to UK and international exploration and production investments.

In addition to UK North Sea tax advice, the team has worked on many projects involving assets in North West Europe, the CIS, North/South America, North Africa, West Africa, India/Pakistan and Asia/Pacific.

Focused Tax Assessment And Advice

With extensive experience advising oil and gas companies on acquisition structures, the tax structuring pages will focus on specific industry issues that are likely to impact the transaction, including:

  • withholding tax and double tax treaties;
  • transfer pricing issues;
  • tax deductibility of existing funding arrangements and treatment of capital expenditure programmes;
  • cost/tax recovery mechanisms, including those set out in the PSC/TAC;
  • treatment of VAT; and
  • tax treatment of government incentives.

Value Of Tax Structuring Section

Work will be undertaken by tax advisers who specialise in oil and gas transactions and who can pull on local expertise from around the globe.

Early identification of the optimum structure will assist in providing a smooth transaction process and will focus due diligence on key potential exposures.

Case Study

Our tax services aim to add value to a transaction. For example, on a recent energy acquisition:

  • tax due diligence confirmed that the amortisable tax basis was low;
  • we reviewed a number of acquisition structures with the aim of obtaining tax relief for the purchase price. Working with our specialist leasing experts we assessed different financial flows and potential tax exposures and fed these into the negotiations on the purchase price and the legal documentation; and
  • the final structure adopted involved a complex sequence of transactions and our advice included communication of them, in an easily understandable manner, to both the client and their legal advisers. The tax aspects were key to the success of the transaction.



The funding considerations section will be led by the Deloitte Debt Advisory Group, which is a team of professionals with over 100 years of banking experience. The team has significant oil and gas experience including reserve-based lending. The UK team is part of a wider international practice group encompassing a further 15 European countries.

The debt markets are currently extremely challenging, bank balance sheets are under considerable pressure and liquidity continues to be an issue. As a result the availability of credit has reduced and the cost has increased. In this difficult environment Deloitte Debt Advisory has a track record of success on debt raising, capital structuring refinancings and debt restructuring. Key funding considerations in this context are likely to be:

  • existing facilities and arrangements;
  • preservation of debt structures;
  • quantum;
  • pricing and fees;
  • covenants; and
  • hedging.

Value Of Debt Advisory Services

In-depth analysis of potential target balance sheet with respect to reviewing and benchmarking existing funding arrangements and assessing optimum capital structure.

Independent strategic advice on financing objectives, approach to institutions, sources of finance, credit assessment and currency, interest rate, commodity and credit default hedging.

Sample Feedback

"Deloitte Debt Advisory provided me with invaluable support and advice during Travis Perkins recent Ł1bn refinancing."
Paul Hampden Smith (CFO), Travis Perkins

"We have had a number of advisors over the last six months so we have been able to compare. In my view, your team was the best for efficiency, professionalism and getting the job done."
Morgan Jubb (CFO) Walbrook



The financial review section will be led by the transaction services team. Areas of analysis include:

  • capital commitments (coordinated with licence block analysis and PSC/TAC reviews to assess short/medium-term cash requirements;
  • high level assessment of trends in historical financial performance;
  • key sensitivities to the business model;
  • review of provisioning;
  • restricted cash levels;
  • impact of accounting policy differences; and
  • working capital valuation issues.

Phases Of Work

The initial phase is focused on identifying 'red flag' issues that could bring the investment into question, largely based on publically available information.

As greater access is obtained we will focus in conjunction with our specialist SPA team on identifying valuation issues to be utilised in pricing negotiations and in generating key issues that may impact terms of the sale and purchase agreement.

Value Of Financial Considerations Section

Provision of additional information and analysis to assist the company in developing its valuation model.

'Red flag' issues will be identified early in the process which could save significant transaction costs.

The report will act as concise, independent reference point for the Board when assessing investment decision.

Early identification of working capital issues will assist you in planning financing arrangements.

Case Study

The Deloitte oil and gas transaction services team prepared a tailored key issues report on a cross border acquisition of a Canadian listed, American based upstream oil and gas company with assets in South East Asia.

The target held assets in a region familiar to the client and so a focused due diligence report was commissioned in two phases with an initial phase based on publically available information and a later phase based on full access in preparation for the acquisition and integration of the target.


Recent Oil And Gas M&A Transactions

Deloitte is recognised as one of the world's leading providers of upstream and downstream oil and gas consultancy services and information.

Our Global Energy and Resources Group includes senior partners from around the world, providing comprehensive integrated solutions to the energy market. These solutions address a range of challenges facing energy companies as they adapt to a changing regulatory environment, to political, economic and market pressure and to technological development.

Deloitte's oil and gas team, part of our Global Energy and Resources Group, comprises over 2,500 professionals incorporating audit, tax, consulting and corporate finance expertise covering all significant oil and gas regions. The team includes oil and gas industry-trained personnel with geoscience, petroleum engineering, economics, commercial and IT experience.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.