Structuring Oil and Gas Purchase and Sale Agreements: Key Considerations and Provisions

Practitioners understand that there are legal and tax concerns inherent in the oil and gas property purchase and sale process. Among those concerns are the negotiation of a binding or non-binding LOI used to define the key terms of the acquisition, the performance of due diligence necessary to confirm the operational and environmental conditions of the properties, the drafting, negotiation and execution of the oil and gas property PSA, the operation and maintenance of the properties during the period beginning with the execution of the PSA and ending with the closing of the purchase and sale (the Pre-Closing Period), and, of course, structuring the purchase and sale to provide the highest after-tax cash proceeds for the seller while at the same time providing the lowest achievable after-tax cost of purchasing the properties for the purchaser.

Listen as our authoritative panel provides practitioners with an understanding of the key aspects of the LOI and PSA, including: drafting the LOI (whether binding or non-binding) to provide the key terms of the PSA; drafting the PSA to provide for the payment of the base purchase price and the adjustments thereto at closing and at a post-closing true-up date, the representations, warranties and covenants of the seller and purchaser of the properties, indemnification of seller or purchaser for breach of representation, warranty or covenant, resolution of title and environmental issues, the conditions for termination of the PSA, the assumption of seller’s obligations by purchaser, the and the allocation of responsibility for operation, maintenance and taxes during Pre-Closing Period. Importantly, the impact of the Tax Cuts and Jobs Act of 2017 on the structuring of oil and gas property purchases will be discussed.

1. Letter of intent
   1. Binding provisions
   2. Non-binding provisions
   3. Confidentiality
2. Environmental due diligence
3. Tax considerations
4. Key provisions
   1. Reps and warranties
   2. Disclosures
   3. Allocation of liabilities and indemnities
   4. Allocation of purchase price
   5. Termination
   6. Purchase price, adjustment to purchase price, and payment

The panel will review these and other crucial issues:

• What are the critical factors to consider when entering a PSA?
• What are the essential provisions when structuring PSAs?
• What issues frequently arise when structuring PSAs and what strategies should be used to allocate risk?