Upstream Oil & Gas Acquisition & Divestment

Current headlines are full of stories about transactions in the oil and gas industries. Frequently there are buyers and sellers who determine that one party will divest assets to an acquiring party. How do these decisions get made? What triggers them and why does one party see an asset with limited value while the other party sees greater value in the same assets? The field of mergers and acquisitions is loaded with uncertainties and risks. This course will walk you through the deal process from the beginning to closing while helping you evaluate the prospects each step of the way. From those just getting their first taste of acquisitions and divestures to those who are seasoned deal people, this course has something for everyone to take away and begin to use the minute they return to their company. You will learn: The mechanics of an oil and gas transaction How to analyse the viability of an oil and gas deal Conducting the proper due diligence to protect from the “hidden” items Common reasons why deals fall apart and how you can avoid them When to walk away from a deal How to conduct effective bidding negotiations for a potential target How to evaluate a deal from A to Z Sources of financing the deal Who should attend? For CEO’s, business owners, senior managers, business development personnel, investment managers and financial managers from all industries this course is a must attend. In addition, anyone who is involved in the due diligence or integration of a merger or acquisition will find great value in this practical course.
Day 1 Development of the Differing Phases of the Upstream Oil and Gas Industry The different fiscal regimes Acquisition – gaining the legal permission to proceed with an exploration project Government licensing, Production Sharing Agreements (PSA), mineral leasing Exploration and evaluation - successes and failures What determines success/ failure Key ingredients for success Development – commercialising the assets Including decommissioning charges Production – lifting and selling the production in a market Transportation and pricing Enhanced Oil Recovery (EOR) – deciding when to invest for more return The investment phase and the recovery phase Exercise: Determining the key elements of a transaction Most common types of transactions – who are the key players What are the main drivers behind transactions Growth Diversification Political considerations Strategic implications Exercise: Delegates will assume the role of either a buyer or a seller to make a transaction Day 2 Overview: Steps in the M&A Planning and finding The right candidates Screening potential opportunities Portfolio consequences Due diligence The due diligence checklists – the key to a successful transaction Hidden assets and liabilities Understanding the business Understanding the market Understanding the people Financial analysis to help determine value, price and terms Differences in financial statements Small versus large Debt Accounting methodology Recasting the balance sheet Normalising Income for a truer picture of analysis and valuation Digging deep into the cash flows Post acquisition pro forma financials Exercise: Determining the maximum price of a transaction Case study: Restating the balance sheet for an M&A evaluation Financial analysis Review of financial analysis issues Valuation and pricing Overview of various valuation techniques and models Asset valuations — valuing the balance sheet Discounted cash flow (DCF) valuation Definition of cash flows Terminal value alternatives Determining the discount rate Determining the forecast period Excess earnings defined Free cash flow explained Discounted cash flow valuation ‘Rule of thumb’ approaches Industry examples Finding information/ references Market comparables Private versus public companies Weighted after-tax cost of capital (WACC) Company wide Post acquisition Review of valuation issues Case study: Valuation of cash flows for a transaction Day 3 Financing & Deal Structure Deal structure and valuation of securities Synergistic opportunities Case study: Putting a value on synergies and non-qualitative issues Financing the deal Capital markets Role of bankers and other financial intermediaries Constructing the acquisition contract Legal framework and key covenants, terms and conditions Typical purchase agreements Decision process Role of investment bankers and other advisors Key value drivers in a transaction When an acquisition premium is worth it Exercise: Putting together an “offer” for a transaction including the terms and conditions of the contract Course summary and close