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‘Red-flag’ review to support client’s potential acquisitions

Acquisition & Divestment

Project details

Start date

October 2017

End date

October 2017

Location

UKCS
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ADIL’s client was looking to expand their portfolio and found an attractive opportunity of acquiring a package of assets. ADIL were asked to provide independent evaluation on the assets’ integrity raising areas of concern and their operability, providing an independent view on current operations.

ADIL was required to review their expenditure profiles (Opex, Capex and Abex), as well as identify areas of improvement to justify further optimisation. The client required a thirdparty opinion on investment scenarios and future growth of the assets to attain maximum profit and longevity of the assets.

The contradictory nature of the assets, two subsea tiebacks and two significantly different producing assets in different areas of the North Sea, required detailed research and wide-ranging expertise.

An important part of the work was to identify the key risks for all four assets that had the potential to significantly impact any investment decision, negotiation stance, as well as rating these risks accordingly. An appraisal of the maintenance philosophy was part of the existing-producing assets evaluation and a confirmation for the cost estimates and schedule for any development assets was delivered.

All assets were carefully examined and several issues were identified within specific areas which were considered key risks in terms of value/opportunities and reputation. All the documents provided by the client were thoroughly analysed and a high-level red flag review - risks and cost wise of topside infrastructure has been conducted. ADIL also formulated pertinent clarification questions for the client to pose to the seller. As it transpired, there were not any true red flags, though numerous risks were identified, challenges, future opportunities, clarification / data requests and financial optimisation prospects.

A full red flag review would typically require three to four weeks of work. As rapid evaluation was required, it was necessary to narrow down the scope of work and the evaluation including the red flag report was prepared in only eight days involving minimum resources - two people.

ADIL specifically delivered:

  • A view on the appropriateness of the Asset Integrity Management systems in place for each asset and the degree to which they have been applied
  • Identification of key equipment for each asset that may be subject to significant repair or replacement
  • An evaluation of the maintenance philosophy and reliability of the fields identifying any major non-conformances
  • A report which highlighted the presence of any red flags, areas of concern/risk and opportunities
  • Evaluation of the financial performance of the assets
  • An independent opinion on future growth and investment opportunities
  • A thorough comprehensive report and presented it to the client
  • A discussion of the key risks for each considered asset that may be relevant to any investment decision, rating these risks low / medium / high
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