Due Diligence - Oil Gas And Energy

According to Wikipedia Due diligence is the investigation or exercise of care that a reasonable business or person is expected to take before entering into an agreement or contract with another party, or an act with a certain standard of care. It can be a legal obligation, but the term will more commonly apply to voluntary investigations. 

But is that all there is to it ? of course not There is a misconception by so many that actually believe that just by coming across a negative write up about individual or businesses is suffice to assume the worst about the party concerned hence no further investigation need be conducted.. That person cannot be trusted or conduct business with

This negative write up should not be taken as the truth of the matter or conclusive of the actual events that transpired between both parties . unless a thorough investigation is carried out in order to arrive at the conclusion and must be factually correct , corroborated and supported with facts

The internet search or write up on an individual or persons companies or businesses should only be taken on face value and not a true reflection of the whole matter especially in this days of internet abuse that seems to be widely carried out by various people. thus giving bad names to the innocent parties that are oblivious of the harm being done

The act of conducting a due diligence on persons or companies should not be based on internet findings only as this could always lead to wrong conclusions about an innocent entity thus preventing what could have been a prosperous transaction between two parties from taking place. 'Guilty until proven innocent' not innocent until proven guilty.

Why does Due Diligence matter?

Due diligence helps people and companies understand the nature of an investment the risks of an investment, and how (or whether) an investment fits into a particular portfolio. Due diligence isn’t just good sense, it’s an obligation investors owe to themselves -- doing this sort of "homework" on a potential investment is often essential to making prudent investment decisions.

How does Due Diligence work?

For individual investors, due diligence often means studying annual reports, SEC filings, and any other relevant information about a company and its securities. The objective is to verify the material facts related to the purchase of the investment, as well as to understand whether the investment fits an individuals return requirements, risk tolerance, gains needs, and asset intelligence goals.

An individual's due diligence might include reading the company’s last two or three annual reports, several recent 10-Qs, and any independent research they could find. In doing so, they would develop a sense of where Company ABC is headed, what market factors might affect the commodity’s price, and how volatile the stock is. This in turn might give them direction about whether the investment is right for you, and if so, the size and timing of their investment.

In a merger scenario, due diligence often involves a team of people specially tasked with reviewing and verifying every aspect of an investment in another company. In many cases, this team might include lawyers, accountants, and investment bankers.