The Role of Due Diligence in Upstream Transactions

Few stages of an upstream oil and gas transaction add as much value, and are as often compressed, as the due diligence phase. In a sector in which a defective historical assignment, an expired permit, an unsettled host community claim, or an undisclosed cash call arrear can erode the economics of a multi-hundred-million-dollar acquisition, due diligence is not a procedural formality interposed between bid and signing. It is the discipline through which the buyer converts a polished information memorandum into something it can actually invest in, prices what risk remains, and confirms that the deal it has been negotiating is the deal it is about to close. This article sets out, in practical terms, how due diligence functions in Nigerian upstream transactions, why the regulatory environment makes the exercise particularly demanding, and how an experienced deal team should plan and run the process to extract the protection that diligence is uniquely placed to deliver.