E&P A&D Business Strategies: Getting the Deal Done

Here are key factors when considering representation and warranty insurance in upstream A&D transactions.

(Source: Hart Energy; Shutterstock.com)

[Editor's note: A version of this story appears in the May 2022 issue of Oil and Gas Investor magazine.]

As representation and warranty insurance (RWI) became commonplace in the M&A landscape, its use in upstream A&D transactions generally lagged, with RWI initially being used by buyers to alleviate collection concerns in transactions with distressed sellers.

However, as A&D activity rebounded following the worst of the pandemic, dealmakers have increasingly implemented RWI. Regardless of whether this trend is attributable to the influence of private equity in the oil and gas industry, the evolution of the RWI market and/or increased demand for the benefits of RWI during the recent wave of consolidations, dealmakers will increasingly be required to consider whether RWI makes sense for a particular transaction.

Keeping in mind this trend, this article focuses upon the benefits of RWI for sellers and buyers, as well as other practical considerations that can impact the analysis of whether using RWI makes sense for a particular transaction.

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