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Exploring the Technical Due Diligence of an Oil Company

By July 9, 2024Case Studies2 min read
Exploring the Technical Due Diligence of an Oil Company

Introduction:

Technical due diligence plays a crucial role in assessing the operational and technical aspects of an Oil company. A Private Equity Firm considers acquiring a stake in a mid-sized Oil Company. The Equity firm decides to evaluate feasibility, operational efficiency & potential risks involved.

1. Oil & Gas Reservoir Evaluation:

   – Petroleum engineers and geologists assess the quality and quantity of reserves.

   – Evaluates porosity, permeability and fluid properties of the reserves

   – Analyze production history, decline curves, recovery factors

2. Production Facilities and Infrastructure:

   – Engineers inspect the production facilities, including wellheads, processing plants, pipelines, and storage tanks.

   – Assess the condition, capacity, and efficiency of equipment and infrastructure

   – Identify maintenance issues, potential upgrades & compliance with environmental regulations.

3. Field Development Plans:

   – Experts review the field development plans and exploration strategies

   – Assess technical challenges such as drilling costs, well spacing, and reservoir management techniques.

   – Evaluate technology adoption, innovation initiatives, and strategic partnerships

4. Health, Safety, and Environmental Compliance:

   – Experts audit the compliance with environmental regulations and sustainability practices.

   – Evaluate risk management protocols, emergency response plans, and environmental impact.

   – Occupational health and safety standards are reviewed.

5. Regulatory and Legal Considerations:

   – Legal experts review the regulatory filings, permits, licenses, agreements

   – Assess compliance with government regulations, taxation policies and identify legal risks or litigations.

   – Evaluate Intellectual property rights, patents, and technology licenses related to exploration and production activities

Conclusion:

Conducting a comprehensive technical due diligence into the Oil Company’s  operational and technical aspects, helped them make informed investment decisions, risk mitigation strategies, and potential value-creation opportunities.

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