Oil and Gas Sale and Purchase Agreements
SPAs for International Oil and Gas Aquisitions and Divestitures, Second Edition
John LaMaster, Caroline-Lucy Moran
This new edition, written by experienced and well-known practitioners from within the oil and gas industry, is intended to provide a practical review of the provisions typically included in oil and gas sale and purchase agreements.
Sale and purchase agreements relating to oil and gas assets are highly specialised, reflecting the unique nature and characteristics of the industry itself. This book, written by experienced and well-known practitioners from within the oil and gas industry, is intended to provide a practical review of the provisions typically included in such agreements.
The second edition of this title includes updated and revised chapters from the first edition, as well as new chapters on: preliminary agreements (memoranda of understanding, letters of intent); disclosure letters; private equity transactions; warranty and indemnity insurance; and material adverse changes.
This new edition aims to benefit lawyers and commercial negotiators working in the industry who handle sale and purchase transactions and who want to better understand the usual terms and conditions involved in those transactions. Legal professors and their students could also benefit from using the book as a teaching aid based on real-world experience.
Table of Contents
|Table of Contents||3|
|Consideration in oil and gas sale and purchase agreements||45|
|Conditions precedent and deferred completions||65|
|Covenants in upstream acquisitions and divestitures||99|
|Oil and gas warranties||131|
|Warranty and indemnity insurance||179|
|Liabilities and indemnities: allocation and limitations on liability, and the use of indemnities||195|
|Environmental provisions in oil and gas transactions||217|
|Competition law provisions in sale and purchase agreements||253|
|Tax aspects of oil and gas mergers and acquisitions||309|
|Material adverse change clauses||327|
|Private equity considerations||349|
|Governing law and jurisdiction clauses||375|
|Oil and gas boilerplate provisions||401|
|About the authors||415|
|About Globe Law and Business||443|
Trainee solicitor, Vinson & Elkins RLLP
Afzaal Abidi is a trainee in the London office of Vinson & Elkins, currently seated in the energy transactions and projects group. He has advisory and transactional experience in project development and finance, mergers and acquisitions, and engineering, procurement and construction contracts, primarily in the energy sector.
Counsel, Akin Gump Strauss Hauer & Feld LLP
Nicholas Antonas is a counsel with Akin Gump Strauss Hauer & Feld LLP, based in London. He advises international energy companies, private equity and hedge funds, bondholders and lenders, primarily in relation to energy-related cross-border mergers and acquisitions, project developments and restructurings. Nicholas has extensive experience advising on decommissioning matters, and has presented and co-edited a text on the subject.
Partner, Locke Lord LLP
Kevin Atkins is a partner in the corporate department at Locke Lord LLP in London. His practice focuses on the energy sector, and he has more than 15 years’ experience advising on international cross-border upstream oil and gas mergers and acquisitions, joint venture arrangements, equity capital markets work and debt financings for energy companies and energy and infrastructure projects. He has worked on a number of high-profile upstream transactions across Africa. He is very familiar with the issues facing equity investors and project lenders and host governments in the context of corporate transactions, and the needs of energy companies developing oil and gas projects during the M&A process. He is also a regular contributor to oil and gas texts.
Counsel, Ropes & Gray (London)
Paige Berges is counsel in Ropes and Gray’s anticorruption and international risk practice group. She is a US and UK-qualified lawyer with broad cross-border experience conducting internal investigations, enforcement and defence as well as in-house experience in private equity and investment banking. She focuses on advising clients on pre-investment due diligence and postinvestment monitoring to ensure compliance with economic sanctions, anti-money laundering/ counter-terrorist financing and anti-corruption regulations. In addition to US, UK and pan- European practice, Paige brings significant experience helping clients build compliance programmes across sub-Saharan Africa, Southeast Asia and the Middle East and North Africa.
Partner, Morgan, Lewis & Bockius UK LLP
Olivier Chambord represents a variety of international clients in project development, mergers, acquisitions and disposals in Europe and Africa. In particular, he focuses on acquisitions and dispositions of oil and gas and mining assets. Olivier also assists clients on the development of oil and gas and mining assets and infrastructure, including by advising on intergovernmental and host government agreements, production sharing and joint operating agreements, concessions, transportation agreements, supply and sale agreements. Olivier is listed in a number of legal guides, including the International Who’s Who of Oil and Gas and The Legal 500.
Partner, Winston & Strawn LLP
Peter Crowther is the managing partner of Winston’s London and Brussels offices and is widely recognised as a leading competition and trade lawyer. A significant part of his practice involves advising companies on a wide range of cartel and merger proceedings and associated litigation.
He has extensive experience advising on trade/sanctions laws, EU merger control, state aid, free movement and general EU competition and regulatory compliance. A substantial part of Peter’s practice involves defending multinational companies in a wide range of national and international proceedings, often simultaneously across a number of jurisdictions.
Peter has a long track record of advising household-name companies across a significant number of sectors, including broadcasting, pharmaceuticals, commodity products, petrochemicals and telecommunications. He also devises and implements compliance programmes covering areas such as competition, trade/sanctions, bribery, and corruption. Peter is a former law lecturer and the former holder of a Jean Monnet professorship in European law.
Partner, Locke Lord LLP
Matthew Daffurn is a partner in the London office of Locke Lord LLP. He has significant experience acting for corporations, lenders, sponsors, governments, multilateral agencies and insurers in relation to the development, financing, acquisition and disposal of energy and infrastructure assets in Africa and other emerging markets. Matthew has advised on a number of high-profile transactions across all areas of the oil and gas value chain. In addition to advising buyers and sellers of oil and gas assets and issuers and investors alike on capital raising transactions, he has particular expertise in addressing the issues presented by lending on the basis of oil and gas collateral.
Richard Ellison has worked for Magic Circle and prominent US firms in the City of London for over 11 years. He has a degree in English law and a maîtrise in French law and specialises in international arbitration, while also frequently advising on English High Court and cross-border litigation. He has advised on high-value disputes before all the major international arbitration organisations, with an emphasis on the energy sector. His cases are almost always international in nature, with a particular focus on the Commonwealth of Independent States countries, West Africa and the Far East, often working alongside local counsel in relevant jurisdictions. He has also regularly worked on disputes involving bilateral investment treaties, in particular in relation to the extractive industries. He frequently advises on how best to achieve the effective enforceability of oil and gas transactions, and his clients have included both national oil and gas companies and a range of privately owned enterprises.
Partner, Norton Rose Fulbright LLP
Matt Foster is a corporate partner in the financial institutions group of Norton Rose Fulbright LLP’s London office. He focuses on the banking and insurance sectors, and advises clients on the full variety of corporate transactions, including mergers and acquisitions, takeovers, joint ventures and general corporate, commercial and regulatory matters. Since 2017, Matt has been recognised by The Legal 500 as a “Next Generation Lawyer” in its Insurance: Corporate & Regulatory section. Matt has been advising both insurers and insureds on warranty and indemnity insurance matters for nearly 10 years and is a regular commentator on the market.
Partner, Stephenson Harwood LLP
Marc Hammerson is a partner and head of oil and gas at Stephenson Harwood LLP. He is an international energy lawyer with 25 years’ private practice and in-house experience working on mergers and acquisitions and projects in over 75 countries. His clients include private equity, oil majors, independents, national oil companies and governments. Marc currently works from the firm’s London office, but during his career he has also been based in Dubai, Houston, Singapore and Tokyo.
Recent editions of Chambers Global refer to him as “an excellent lawyer” and “extremely effective and able to find solutions to complex problems and very technically sound”. Chambers UK ranks Marc in Energy & Natural Resources: Oil & Gas – UK-wide and states that he has “extensive experience in M&A, joint ventures and corporate restructurings in the energy sector. Sources report: ‘He is fantastically commercial. He is highly effective and has all the tricks of the trade in difficult negotiations’”.
Associate, Winston & Strawn LLP
Lisa Hatfield is an associate in the London office of Winston & Strawn. She advises clients across a wide range of sectors on EU and UK antitrust/competition law matters, including dawn raids and cartel investigations, merger proceedings, state aid and compliance issues. She also advises on various regulatory matters.
Senior legal counsel, BW Offshore
Joanna Kay is a senior commercial and corporate lawyer with over 10 years of experience working in emerging markets in the energy and natural resources sector. She has led on a range of complex and demanding international transactions across Africa, South America, Europe and the Middle East, in both in-house and private practice environments. Her particular expertise includes upstream and midstream oil, gas and liquefied natural gas transactions, oil and gas M&A, joint ventures, commercial and contract law and dispute resolution. She is a committee member of the UK Energy Lawyers Group and has contributed to a number of leading oil and gas market publications.
Partner, Norton Rose Fulbright LLP
Hussain Kubba is an energy M&A and corporate partner based in London. His practice focuses on advising international oil and gas companies and national oil companies on corporate and commercial matters, including asset and corporate acquisitions and disposals, farmins/outs, host government contracts, joint venture arrangements, decommissioning matters and operator and commercial contracts in the oil and gas industry.
Hussain has advised on transactions in the United Kingdom, Europe, Africa, Central and South Asia, the Middle East, South and Latin America, and has also been on secondments to major oil companies in the United Kingdom, including in Aberdeen.
He also holds a mechanical engineering and management undergraduate degree from McMaster University (Canada), and was a professional engineer for seven years in Ontario prior to qualifying as a lawyer in England and Wales.
Hussain is a member of the Association of International Petroleum Negotiators (AIPN) and a committee member of the UK Energy Lawyers Group.
John C LaMaster
Partner, Akin Gump Strauss Hauer & Feld LLP
John C LaMaster has more than 30 years of experience in virtually all areas of the oil and gas industry – including upstream, midstream and downstream – throughout Europe, Africa, Russia and the former Soviet Union, the Middle East and the United States. John is highly rated by various publications, including being one of only six lawyers rated Band 1 in Energy & Natural Resources: Oil & Gas in the 2020 edition of Chambers & Partners. He is a frequent author on oil and gas subjects, including co-editing Oil and Gas M&A – A Practical Handbook, Second Edition (2018) and Oil & Gas in Africa – A Legal and Commercial Analysis of the Upstream Industry (2015), and contributing chapters to both of those books and several others. He holds a BA in economics and business administration from Vanderbilt University and a JD with honours from the Paul M Herbert Law Centre at Louisiana State University.
Counsel, Akin Gump Strauss Hauer & Feld LLP
Caroline-Lucy Moran practises in the cross-border transactions department of Akin Gump Strauss Hauer & Feld LLP in London. She specialises in international M&A, joint ventures, project development and equity capital markets transactions, with a particular focus on upstream and downstream oil and gas and power sectors. Caroline-Lucy has worked on transactions throughout Europe, Asia, the Middle East and West, East and sub-Saharan Africa. She has significant private equity experience, having recently been seconded to the London office of The Carlyle Group for over a year. As a trainee, she completed a secondment to ExxonMobil. Caroline-Lucy has been identified as an “Associate to Watch” in the 2020 edition and prior editions of Chambers & Partners UK and won the “Rising Star: Corporate” award at the Euromoney/IFLR Women in Business Law Awards 2016. She graduated from the University of Oxford in 2006 and was admitted as a solicitor of the senior courts of England and Wales in 2010.
Managing partner, Vinson & Elkins RLLP
Alex Msimang has two decades of experience advising clients on the full range of energy-related projects and transactions. He focuses the majority of his work on global energy M&A – principally in the oil and gas sector – with the balance made up of project development and regulatory advisory work.
Alex advises clients across the globe. In the United Kingdom, he helps them navigate the highly sophisticated and regulated energy market and brings that experience to bear on projects across Africa, the Middle East, Latin America and Europe.
Alex serves as the managing partner of the London office, where he has helped lead the firm to continuous recognition in Chambers & Partners UK for Oil & Gas. In 2020, Chambers recognised Alex for his individual efforts as an “eminent figure in oil and gas”. He has previously been recognised by the same publication as “one of the world’s best lawyers” for oil and gas matters.
Partner, Norton Rose Fulbright LLP
Sophie O’Connor is a corporate partner in the financial institutions group of Norton Rose Fulbright LLP’s London office. She is an experienced private equity practitioner with over a decade of experience advising sponsors, portfolio companies and management teams on the range of mainstream private equity transactions. Sophie also advises other investors seeking to deploy private capital, including investment banks, asset managers and major corporates. In addition, she applies her extensive deal experience to advise on warranty and indemnity insurance policies – typically, in relation to large-scale multijurisdictional transactions.
J Scott Porter
Vice president, new business development, Shell Exploration & Production
Vice president, planning and board of directors, Association of International Petroleum Negotiators
J Scott Porter has over 30 years’ experience negotiating a wide range of transactions in the energy sector. He began his career in corporate banking in both New York and Houston, where he focused on project financing and acquisition financing in gas storage, cogeneration, pipelines and oil and gas. In 1996 he moved to Enron International to lead business development efforts in Latin America, including building gas and power positions in both Argentina and Brazil. Mr Porter joined Royal Dutch Shell in 2002 and has lived in London, The Hague and Singapore. His experience during this period included working on a variety of both upstream and downstream projects including divestments in Africa, joint venture restructurings in the former Soviet Union, and various acquisitions and divestments in Europe and Southeast Asia.
In May 2019 Mr Porter was appointed vice president commercial/new business development, North America & Brazil for Shell’s upstream and integrated gas businesses. He graduated from Duke University and attended business school at the Thunderbird Graduate School of International Business in Phoenix.
Partner, Ropes & Gray (London)
Amanda Raad, a US lawyer also admitted as a solicitor in England & Wales, serves as co-chair of Ropes & Gray’s award-winning global anticorruption and international risk practice, as well as London’s white collar and enforcement practice. Amanda has substantial experience negotiating with regulators on behalf of companies and individuals concerning crossborder matters involving corruption, money laundering and other forms of financial fraud. These matters are often subject to scrutiny by foreign regulators, given their multi-jurisdictional nature. Amanda also proactively works with clients across industries and geographies to identify and mitigate risk. Amanda has worked with numerous oil and gas and energy clients to conduct global anti-corruption compliance reviews and risk assessments, and develop and update compliance policies and procedures. Amanda contributes to GIR’s The Practitioner’s Guide to Global Investigations, serves as a director for Lawyers Without Borders and is consistently listed in Chambers UK and UK Legal 500.
Principal, Cross Keys Energy Limited
Peter Roberts advises governments and companies on domestic and international oil and gas transactions, including country entry, joint ventures, M&A, liquefied natural gas project developments and commodity sales contracts. A former chairman of the International Bar Association’s Oil and Gas Law Committee, Peter has authored seven leading industry textbooks (published variously by Globe Law and Business, the Oxford University Press, the Qatar University Press and Sweet & Maxwell); is the editor of the AIPN’s Journal of World Energy Law and Business; and is a visiting professor of law at Universidad Austral, Buenos Aires. He was previously the general counsel for a UK energy company and has worked for several leading law firms in London, Hong Kong and Singapore.
Counsel, Ropes & Gray (London)
Sean Seelinger is a US-trained lawyer based in London and a member of the firm’s litigation and enforcement practice group. Sean’s practice focuses on government-initiated and internal investigations of cross-border anti-corruption, anti-money laundering and trade compliance matters, as well as advising private equity firms regarding compliance and Committee on Foreign Investment in the United States risk associated with cross-border transactions. He also regularly advises multinational corporations on corruption, money laundering and sanctions issues associated with prospective business agreements, and assists companies implement best-practice compliance programmes. Sean frequently assists newly acquired non-US portfolio companies of US private equity firms review their business dealings and internal procedures to ensure compliance with applicable Office of Foreign Assets Control sanctions. While previously based in the New York office, Sean was seconded to the Global Compliance Group of a Fortune 100 multinational oil and gas company. During his secondment, Sean led several internal investigations and assisted with the restructuring of the company’s anti-corruption and anti-boycott compliance programme.
Associate, Morgan, Lewis & Bockius UK LLP
Allison Soilihi represents companies in the extractive industries sector, with a geographical focus on emerging markets. She advises on issues involving acquisitions and dispositions, project development and commercial aspects relating to oil and gas and mining assets. Allison drafts and negotiates agreements encompassing production sharing, joint operations and the transportation and supply of extracted resources. She also counsels on host government agreements, joint ventures and more generally on mergers and acquisitions and general corporate matters relating to extractive companies.
Partner, Norton Rose Fulbright LLP
Holly Stebbing is a dispute resolution lawyer based in London. Her practice focuses on disputes in the energy, renewables and natural resources sectors, both domestic (including UK continental shelf) and international. She has a wide range of experience, including litigation in the High Court and appellate courts, institutional and ad hoc commercial arbitration, and all forms of alternative dispute resolution, including expert determination.
Holly advises international and national energy and mining companies, oilfield services providers, utility companies, petrochemical companies and financial institutions on highvalue, cross-border and complex disputes relating to M&A, including breach of warranty claims, construction matters, joint venture arrangements and all forms of industry contract, including licences and concession agreements, service contracts, decommissioning arrangements, thirdparty access to infrastructure, sale and purchase agreements – including long-term gas supply agreements and power purchase agreements – and transportation and processing agreements.
Partner, Vinson & Elkins RLLP
Chris Strong is an accomplished member of the London energy transactions and projects practice, who represents corporate clients around the world on transactions in the energy and natural resources space.
Chris advises oil companies, banks, private equity funds and government entities on the acquisition and disposition of assets, and on project development transactions relating to upstream oil and gas, power plants, petrochemical facilities, refineries, pipelines, liquefied natural gas, and mining and metals.
In addition, Chris counsels on highly technical commercial agreements that are unique to the energy sector, such as gas sale agreements and power purchase agreements.
Chris is active in the AIPN, where he was the co-chair of a drafting committee to develop the AIPN’s Model Form Asset Purchase Agreement.
Partner, Latham & Watkins LLP
Simon Tysoe is a partner in the London office of Latham & Watkins and co-chair of the firm’s global oil and gas practice. He specialises in mergers and acquisitions, private equity, joint ventures, project development, restructurings and general corporate matters, exclusively in the energy sector, primarily focussing on oil and gas. Although based in London, Simon advises a range of national oil companies, majors, independents and private equity funds on transactions in Europe, Africa, Asia, the Middle East and Latin America.
Senior associate, Herbert Smith Freehills LLP
Julie Vaughan is an environmental lawyer based in London, whose work includes large energy and infrastructure projects, real estate transactions, corporate M&A, some litigation (including the Lungowe case on UK parent company liability) and regulatory compliance advice. In the oil and gas space, she has worked on transactions involving all parts of the hydrocarbons value chain, from decommissioning of upstream platforms to gathering pipelines, onshore receiving terminals, cross-country fuel delivery pipelines, refineries, oil storage terminals, trade in hydrocarbon products, contaminated land issues and chemicals compliance for hydrocarbon products. She also has experience working in-house with an oil major and over the last few years has advised the frontrunner in the UK shale gas industry on environmental permitting and liability. She has a master’s degree in international and EU environmental and natural resources law from University College London, and is named in the legal directories as a star associate.
Associate, Vinson & Elkins RLLP
Suzana Vukasinovic is an associate in the firm’s London M&A and capital markets practice. She has experience advising clients on M&A, disposals, joint ventures, corporate restructurings and general corporate and commercial matters.
Partner, Morgan, Lewis & Bockius UK LLP
David Waldron is a partner in the litigation practice group of Morgan, Lewis & Bockius in London. He holds a BSc and a master’s degree. He has specialised in dispute resolution for over 20 years. He is a solicitor advocate and accredited mediator. In addition, he is authorised to conduct proceedings at the Dubai International Financial Centre courts.
David has litigated and arbitrated many disputes in the oil, gas and energy industry, involving matters such as gas supply agreements, pipeline agreements, refinery fires, fraud, seismic provisions and carbon allowances.
David’s international arbitration work includes matters before the International Centre for Dispute Resolution, the International Chamber of Commerce and the London Court of International Arbitration.
Partner, Druces LLP
Paul White is a tax partner at Druces LLP. He has over 25 years’ experience with UK and US law firms in the City of London. He has advised on the tax aspects of power and energy projects throughout the world, as well as broader UK and international corporate and finance tax matters.
Independent director and energy lawyer, Norton Rose Fulbright LLP
Kimberley Wood is an energy lawyer with 20 years’ experience, specialising in M&A. Most recently, she was head of oil and gas for Europe and Middle East at Norton Rose Fulbright LLP and remains a senior consultant for the firm.
Throughout her career, she has advised a wide range of companies in the sector, from small independents to super-majors. Kimberley was a partner at Vinson & Elkins LLP from February 2011 to April 2015, and was previously at Dewey & LeBoeuf LLP. She is included in Who’s Who Legal Energy 2020 and as an expert in Women in Business Law 2020.
Kimberley is also an independent director and sits of the board of various exploration and production companies, including Energean plc and Gulf Keystone Petroleum, both of which are listed on the London Stock Exchange (LSE). She is also an independent director of Africa Oil Corp, which is listed on TSX (Canada) and Nasdaq OMX (Stockholm), and Valeura Energy Inc, which is LSE and TSX (Canada) listed.
Associate, Vinson & Elkins RLLP
Freddie Wright is an associate in the M&A and capital markets team at Vinson & Elkins RLLP. He has assisted on a range of transactions for private equity funds and state-owned entities across Europe and the Middle East.