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Due diligence on potential acquisition of a large portfolio of assets

Acquisition & Divestment

Project details

Start date

2016

End date

2017

Location

Global – 10 countries
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ADIL had previously worked with their client in other acquisition and divestment studies. For this project ADIL was asked by the client to undertake an initial review of a large portfolio of assets which a major global Operator was looking to divest.

Having successfully completed this short review and provided the client with their initial assessment, ADIL were then asked to fully review the package of assets. The client had agreed exclusivity with the seller at this stage.

ADIL were specifically asked to undertake a high-level review of the materiality of greater than $10 million NPV of the key surface facilities for previously unidentified red flags that could materiality impact the client’s eventual offer to the seller. This review was to focus on:

  • Costs
  • Asset condition
  • Operational performance
  • Projects – including start-up dates and ramp up
  • Management systems
  • Procurement

ADIL were also focus on identifying all opportunities to improve performance.

The package of assets to be reviewed included more than 1000 wells and 70 onshore and offshore developments.

The review of the package of assets had to be fully completed within a six week timeframe.

The first stage of the project was for ADIL to understand the client’s objectives for the project. ADIL was then able to help the client identify the material assets that were most important, recognising that it would not be possible to review every asset in the same level of detail as might be possible in a project with a much smaller scope.

To determine the assets to review in more depth, ADIL, in conjunction with the client, selected assets for review using a combination of factors including remaining/ point forward NPV and potential for reputational risk. ADIL’s project team was set up to best meet the demands of reviewing a portfolio of assets of this size and geographical spread. This was a matrix organisation, but with key team leads for each country / geographical area. These team leads had accountability for their area and called upon ADIL discipline experts for input as required.

The team had extensive experience of delivering due diligence projects and some members of the team were specifically drafted in due to their knowledge of the assets in question. As part of the team, ADIL had people with experience, knowledge and understanding of the geographical region and the assets in question. This allowed the ADIL team to bring real-life, current, in-depth knowledge of market conditions to the work.

The asset managers took a holistic approach to reviewing the key assets agreed with the client, validating operating costs, CAPEX (including DRILLEX) and ABEX and then looking at the asset as a whole to assess how the client could maximise value. This also focused on potential upsides for the clients. Site visits were also undertaken for some key assets. ADIL personnel spent time on five different facilities and provided an assessment to the client within two days of their visit.

ADIL also detailed the conditions precedents that would need to be concluded before the acquisition could be confirmed. Finally, recommendations on how best to approach transition of the package of assets, once the deal completed, was provided to the client. Specifically, some ‘immediate action’ items were proposed.

ADIL’s team were able to deliver and articulate a very accurate assessment of the package of assets, in a short timeframe. ADIL provided data and analysis directly to the client’s banks and financial investors, presenting to them and answering questions in a face-to-face session. This direct interaction was crucial in gaining investor confidence and allowed ADIL to provide comfort from a commercial perspective.

Based on ADIL’s assessment, the client was able to provide funding to their client to make an offer for the package of assets. The acquisition of the assets was completed in 2017. The total value of this acquisition was nearly $4 billion and was one of the largest deals to be completed within the oil and gas industry in the past few decades.

For further information please contact us.