2012 AAPL ANNUAL MEETING SPONSORSPLATINUM

GOLD

SILVER

SAN FRANCISCO SEMINAR GOLF

A wholly owned subsidiary of ExxonMobil

BRONZE

58th Annual Meeting - San Francisco

June 13-16, 2012

Overview of Due

Diligence

William Allen Hood, Esq.Hood, Benoit & Pyle PLLC

AAPL - Copyright © 2012. All Rights Reserved.

Overview of Due Diligence

Typically, the lease files of

small oil companies have

little useful title information.

AAPL - Copyright © 2012. All Rights Reserved.

Overview of Due Diligence

It is sound practice for

the purchaser to conduct a

“thorough title check.”

Overview of Due Diligence

Team members should immediately

review and process

the oil company’s records.

Overview of Due Diligence

Getting the indexes

is the first priority of

the field teams.

Overview of Due Diligence

“Title Standards”

and general laws

are compiled.

Overview of Due Diligence

Getting the rules

on getting copies

is critical.

Overview of Due Diligence

Record Room Clerks

warrant the

highest respect.

Overview of Due Diligence

Lawyers and

landmen work

together.

Overview of Due Diligence

A conservative title

examination approach is

in the client’s best interest.

Overview of Due Diligence

The Purchase and Sale

Agreement (PSA) is the

blueprint of the acquisition.

Overview of Due Diligence

The basic contract

elements are: consent,

the property and price.

Overview of Due Diligence

PSA Property:

1) the minerals

and all rights.

Overview of Due Diligence

PSA Property: 2) agreements,

and 3) every bit of data

about the property.

Overview of Due Diligence

Just “reasonable”

due diligence

is the minimum standard.

Overview of Due Diligence

There is a duty for a

sophisticated party to

investigate the details.

Overview of Due Diligence

Even a hint of

false information calls

for heightened diligence.

Overview of Due Diligence

Caveat emptor:

means using caution in

acquiring oil and gas properties!

Overview of Due Diligence

White v. Potocska,

589 F.Supp.2d 631

(U.S.D.C., E.D. Va. 2008)

Overview of Due Diligence

The standard: to review

every piece of paper

available to the purchaser.

Overview of Due Diligence

There is no excuse not to

review every piece of paper

available to the purchaser.

Overview of Due Diligence

Records and indexes

are reviewed, and guidelines

are written.

Overview of Due Diligence

Leases are checked

for Pugh Clauses

and HBP status.

Overview of Due Diligence

Assignments are examined

to establish the NRI

set in the PSA.

Overview of Due Diligence

A written

Abstract of Title Guidelines

promotes team efficiency.

Overview of Due Diligence

Can you read

your handwriting?

Overview of Due Diligence

There is a presumption

that due diligence

will be conducted.

Overview of Due Diligence

The “Weekly Status Report”

provides accountability

and focus for each researcher.

Overview of Due Diligence

Preston Exploration Co. v.

Chesapeake Energy Corp., et al.,

669 F.3d 518 (U.S. 5th Cir. 2012)

Overview of Due Diligence

October 7: PSAs executed.

November 7: closing.

Overview of Due Diligence

Exhibits reviewed, and

due diligence started

by Chesapeake.

Overview of Due Diligence

November 6: Chesapeake

announces “no closing”!

Overview of Due Diligence

Fifth Circuit ruling: leases

in exhibits can be identified by

volume and page number.

Overview of Due Diligence

Fifth Circuit ruling: recognizes

the certain leases will ultimately

be excluded from the PSA.

Overview of Due Diligence

Preston v. Chesapeake:

the PSA is a process.

Overview of Due Diligence

Twice a month Saturday

classes are mandatory

for team members.

Overview of Due Diligence

Regular classes emphasize

quality and the seriousness

of a landman’s duties.

Overview of Due Diligence

The classes are

conducted like

college seminars.

Overview of Due Diligence

Intensive classes are

essential in learning

about oil and gas law.

Overview of Due Diligence

Fiduciary duty to the

client is the most

important subject.

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