New Year, New Portfolio: Key Considerations to Closing Your Transactions Before the Ball Drops

Written by Miranda Caballero

Stores are full of garland and decorations, and your holiday calendar is beginning to fill; the end of the year is here. At RR&A, our phones are ringing, and emails are chirping with one familiar chorus, “So…do you think we can get this deal done by December 31st”?

Closing transactions before the year’s end comes with its own set of challenges and opportunities. We don’t have a crystal ball, but the following considerations can help you prepare your company for an efficient and expeditious closing:

1. Before moving forward with any deal, it’s essential to have a clear understanding of your current oil and gas asset portfolio. Evaluate the assets you own or intend to acquire, their current production levels, and their growth potential. This knowledge will guide your decision-making process.

2. Define specific, measurable goals for your year-end deals. These objectives may include acquiring new assets, divesting underperforming ones, or optimizing your asset portfolio. Clear objectives will help you stay on track and maintain a sense of purpose.

3.?Proper tax planning can significantly impact the financial outcomes of your deals. Tax implications are commonly the biggest motivating factor for getting a deal done by year’s end. We’ll delve further into considerations related to capital gains, depreciation, tax incentives, and other tax-related matters in a subsequent installment of this blog.

4. Early and extensive due diligence is vital to closing a deal on an expedited timeline. Identifying pitfalls early in the due diligence process equips you with the ability to proactively disclose and address contentious issues in negotiations rather than reactively justifying them to your counterparty.

a. Verify that all applicable permits and licenses are validly registered and up to date, including drilling permits, environmental requirements, operator licenses, and bonding with all applicable federal, state, and local regulatory authorities.

b. Identify any ongoing, pending, or potential legal or regulatory concerns affecting the assets or your company. This includes lawsuits (threatened or actual), regulatory investigations, and safety or environmental issues.

c. Ensure that any liens or encumbrances on the assets have been removed by an official release filed in applicable real property records or that such filing can be made at closing.

Like in all aspects of life, the key to a successful year-end closing is open, honest, and straightforward negotiation with your counterparty. Know where you can give and hold firm where you can’t. Engaging knowledgeable financial, legal, and tax advisors early can save you from dropping the ball before the ball drops.

At RR&A, we understand the importance a year-end deal has to your company’s future opportunities, and we have the expertise to make it happen. Don’t wait until December; let’s get it done now!