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2012 AAPL ANNUAL MEETING SPONSORSPLATINUM
GOLD
SILVER
SAN FRANCISCO SEMINAR GOLF
A wholly owned subsidiary of ExxonMobil
BRONZE
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58th Annual Meeting - San Francisco
June 13-16, 2012
Overview of Due
Diligence
William Allen Hood, Esq.Hood, Benoit & Pyle PLLC
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Overview of Due Diligence
Typically, the lease files of
small oil companies have
little useful title information.
AAPL - Copyright © 2012. All Rights Reserved.
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Overview of Due Diligence
It is sound practice for
the purchaser to conduct a
“thorough title check.”
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Overview of Due Diligence
Team members should immediately
review and process
the oil company’s records.
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Overview of Due Diligence
Getting the indexes
is the first priority of
the field teams.
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Overview of Due Diligence
“Title Standards”
and general laws
are compiled.
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Overview of Due Diligence
Getting the rules
on getting copies
is critical.
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Overview of Due Diligence
Record Room Clerks
warrant the
highest respect.
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Overview of Due Diligence
Lawyers and
landmen work
together.
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Overview of Due Diligence
A conservative title
examination approach is
in the client’s best interest.
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Overview of Due Diligence
The Purchase and Sale
Agreement (PSA) is the
blueprint of the acquisition.
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Overview of Due Diligence
The basic contract
elements are: consent,
the property and price.
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Overview of Due Diligence
PSA Property:
1) the minerals
and all rights.
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Overview of Due Diligence
PSA Property: 2) agreements,
and 3) every bit of data
about the property.
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Overview of Due Diligence
Just “reasonable”
due diligence
is the minimum standard.
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Overview of Due Diligence
There is a duty for a
sophisticated party to
investigate the details.
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Overview of Due Diligence
Even a hint of
false information calls
for heightened diligence.
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Overview of Due Diligence
Caveat emptor:
means using caution in
acquiring oil and gas properties!
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Overview of Due Diligence
White v. Potocska,
589 F.Supp.2d 631
(U.S.D.C., E.D. Va. 2008)
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Overview of Due Diligence
The standard: to review
every piece of paper
available to the purchaser.
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Overview of Due Diligence
There is no excuse not to
review every piece of paper
available to the purchaser.
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Overview of Due Diligence
Records and indexes
are reviewed, and guidelines
are written.
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Overview of Due Diligence
Leases are checked
for Pugh Clauses
and HBP status.
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Overview of Due Diligence
Assignments are examined
to establish the NRI
set in the PSA.
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Overview of Due Diligence
A written
Abstract of Title Guidelines
promotes team efficiency.
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Overview of Due Diligence
Can you read
your handwriting?
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Overview of Due Diligence
There is a presumption
that due diligence
will be conducted.
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Overview of Due Diligence
The “Weekly Status Report”
provides accountability
and focus for each researcher.
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Overview of Due Diligence
Preston Exploration Co. v.
Chesapeake Energy Corp., et al.,
669 F.3d 518 (U.S. 5th Cir. 2012)
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Overview of Due Diligence
October 7: PSAs executed.
November 7: closing.
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Overview of Due Diligence
Exhibits reviewed, and
due diligence started
by Chesapeake.
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Overview of Due Diligence
November 6: Chesapeake
announces “no closing”!
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Overview of Due Diligence
Fifth Circuit ruling: leases
in exhibits can be identified by
volume and page number.
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Overview of Due Diligence
Fifth Circuit ruling: recognizes
the certain leases will ultimately
be excluded from the PSA.
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Overview of Due Diligence
Preston v. Chesapeake:
the PSA is a process.
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Overview of Due Diligence
Twice a month Saturday
classes are mandatory
for team members.
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Overview of Due Diligence
Regular classes emphasize
quality and the seriousness
of a landman’s duties.
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Overview of Due Diligence
The classes are
conducted like
college seminars.
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Overview of Due Diligence
Intensive classes are
essential in learning
about oil and gas law.
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Overview of Due Diligence
Fiduciary duty to the
client is the most
important subject.
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