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Preferential Rights Review

Preferential Rights Review re-reads every preferential right to purchase and consent through its amendments when the deal structure changes, and counsel signs each reading.

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Follow one sale, from first look to the schedule ↓
The problem

An old amendment can decide whether a partner buys your best area first

Before you sell, every agreement in the area has to be read for a partner’s right to buy first, refuse consent or ask for notice. The answer often hangs on an amendment from decades ago that nobody has read alongside the original, sitting in a box, a data room or the operator’s files.

Then the structure changes from an asset sale to a share sale or a merger, and the spreadsheet holds answers without their reasons, so nobody can say which ones just flipped. One missed clause can hand a partner the asset, or hold up closing for months.

Built forLand negotiatorsContracts paralegalsJoint venture counselAssociate general counselCompliance reviewers

The Problem Today

Old agreements hide clauses that let a partner buy first, and the deal’s structure decides which ones fire.

10 days
for partners to answer a notice under one widely used model form published
1,200 h
to read 900 papers four ways by hand, at 20 minutes each our estimate

Pulled from boxes today

  • Agreements
  • Amendments
  • Letters
  • Exhibits
  • Amendments nobody re-readA later change can rewrite who may buy first
  • Redone for each structureA spreadsheet holds answers, never the reasons

The Solution

  1. Rebuild each chainScans become each agreement and its amendments, in order
  2. Flip the structureAsset sale, share sale, merger or parent control, re-read on a switch
  3. Quote the governing wordsEach reading cites its page and the amendment that changed it
  4. Counsel decidesConfirm or overrule with a reason; the deal path has one owner

Built-in controls

  • Counsel checks what the negotiator sends
  • Agents propose and state no legal conclusion
  • The schedule takes signed readings only

What You Get

The deal team picks a structure knowing which rights can stop it, and who holds each one.

  • A schedule from signed readingsA ruling changes the closing schedule at once
  • Windows on one calendarLast days counted from the notice date
  • Unread stays marked unreadGaps and no-right findings wait for counsel
One sale, one day

A joint operating agreement review, one deal structure at a time

A company is selling one unit of an onshore field for an indicative $640.0M: 212 agreements, 688 amendments, 16,390 pages. The deal path is due in 14 days, and the structure is still open.

demoThe field, the agreements, the holders and the values are sample data, and the clause wording was written for the sample.

  1. 01First look

    An asset sale fires 37 rights, and $179.3M of the deal can be bought out

    Land negotiator

    The first screen asks one question: what does this deal fire? Four switches sit above a tree of 212 agreements, one stem each and one bead per amendment. On an asset sale, 37 rights fire in 34 agreements: 23 preferential rights, 9 consents and 5 change of control clauses. Of the $640.0M indicative value, $179.3M sits under a right to buy.

  2. 02Same hour

    Flip to a parent share sale and the count falls to 17, yet $125.5M stays

    Land negotiator

    One click and a scan crosses the tree while every clause is re-read for the new structure. Seventeen still fire, because moving the interests into a new company is itself an assignment, and the consents carry no affiliate exception. Fourteen ask for consent or notice. Three give a partner the right to buy, over $125.5M. The count fell by more than half; the value barely moved.

  3. 03Same hour

    Three rights to buy stay lit, and one carries $118.4M on its own

    Land negotiator

    Only rights to buy leaves the clauses that can take an asset away. JOA LM-038 has a 30-day window and $118.4M allocated to it. JOA LM-059 runs 45 days on $3.7M, and JOA LM-014 runs 15 days on $3.4M. Two of the three are marked as changed by an amendment, which is where the negotiator looks next.

  4. 04Walking the chain

    The preferential right to purchase that the third amendment widened

    Land negotiator

    JOA LM-038 sits on the 1977 edition of the joint operating form, with 4 amendments. Walking them one by one, the bead under the third reads Answer changed here. It turned a plain sale into a direct or indirect transfer, counted a sale of more than fifty percent of a party’s voting shares, and took the merger and affiliate exceptions away for such a transfer.

  5. 05Before lunch

    The reading goes to counsel, and the sender has no way to check it

    Land negotiator

    On the left, the amendment page opens with the governing words marked. Four proposed readings sit on the right: fires on each structure, at 98%, 92%, 89% and 87%. After reading the page, the negotiator accepts and sends it. Counsel is named as the checker, and the sender is told plainly that whoever sent a reading cannot check it.

  6. 06Afternoon

    One price covers 212 areas, so counsel must answer the package question

    Joint venture counsel

    Confirm and sign does nothing until counsel answers how the price applies. One price covers the whole sale, and the third amendment lets the holder ask an independent expert to set a fair value when no price is stated for the interest alone. The choices are value holds, its area only with a price to set, or the holder may claim more.

  7. 07Afternoon

    Signed, with a flag that this right can hold up closing

    Joint venture counsel

    Counsel picks its area only, price to set, ticks that the right can hold up closing, and signs. The reading now shows signed beside the red flag. Counsel cannot clear that flag alone: it lifts when a waiver is signed, a later paper removes the right, or the reading changes, and clearing it means asking the associate general counsel.

  8. 08Late afternoon

    Four structures side by side, and five things that stop the share sale

    Joint venture counsel

    The deal path has one owner and a due date. It sets the four structures against each other: rights that fire, value under a right to buy, long windows, firing and not yet signed. Counsel names a plan for JOA LM-038, ask for a waiver before signing. The list of blockers drops to 5, and the proposal stays shut until each one clears.

  9. 09End of day

    The closing schedule is built only from signed readings

    Contracts paralegal

    The draft schedule of preferential rights and consents lists 7 items and holds 10 until they are signed. JOA LM-038 is item 1, with its 30-day window and the waiver plan beside it. Each row carries its article, holder and a notice draft. A ruling or a plan changes this page at once, so nobody retypes a schedule after a call.

Seventeen rights against 37, and the value under a right to buy hardly moves

The deal path’s own comparison, for the same 212 agreements. Change of control at the parent is tested for the file and not proposed for this sale.

StructureRights that fireValue under a right to buyFiring, not yet signed
Asset sale37$179.3M30
Parent share sale17$125.5M10
Merger19$127.6M12
Change of control at the parent3$118.4M2

demoSample data, from the working solution.

Four things a spreadsheet of pref rights would have let through

A sale clause widened to indirect transfers

The third amendment to JOA LM-038 reaches a sale of the parent’s voting shares, so a share sale does not escape its $118.4M right.

Consents that fire before the sale

Moving the interests into a new company is an assignment, and 9 consents have no affiliate exception, so they fire at that first step.

A count that falls while value stays

The share sale cuts 37 rights to 17, yet $125.5M of the $179.3M under a right to buy remains.

A package price a holder can challenge

One price covers 212 areas, and the amendment lets the holder ask an independent expert to set a fair value.

demoSample data, from the working solution.

Around the reading

The calendar, the gaps and the files behind each right to buy

The paralegal, counsel and the compliance reviewer work the same sale from these screens. Each opens larger on a click.

The waiver, draftedDrafted for counsel, marked draft only and not sent. It asks the holder to give up the prior right for this sale only.
The deal calendarEvery window counted from the notice date. A 60-day window ending on a weekend is flagged, and moving the notice date needs a second person.
Counsel’s readings9 of 208 signed, 34 below the 85% line and read word by word. No-right readings are signed by family, after counsel opens a drawn sample.
Missing amendmentsSeven chains that cannot be read through, each with its reason. The gap finder drafts the request, and a person sends it.
All 212 agreementsSearch the words of every clause and amendment. The sum on top: 1,200 hours to read 900 papers four ways at 20 minutes each.
Audit trailPeople and agents in one trail, from scans loaded to the plan named for JOA LM-038, and no line can be changed.
Rules and who signs themA sample size change waits for the associate general counsel. A second person on every decision and no legal conclusions from agents are locked.

demoSample data, from the working solution.

Who takes, checks and approves each reading on the sale

A maker takes each proposed reading, a different person checks it, and the deal path has one approver.

Land negotiator
Sees
What fires on each structure, the chain and the governing words
Signs
Accepts a proposed reading and sends it to counsel
Contracts paralegal
Sees
Chains rebuilt from scans, missing papers, the calendar
Signs
Sends the requests for missing papers and proposes notice dates
Joint venture counsel
Sees
Each reading beside its page, and the package question
Signs
Confirms or overrules each reading, and names the plan for a right that can hold up closing
Associate general counsel
Sees
Four structures side by side and what stops each one
Signs
Approves the deal path, clears a closing flag and signs rule changes
Compliance reviewer
Sees
Every reading, source and audit line, read only
Signs
Nothing; takes the audit export and the evidence file

Calls on a right of first refusal that stay with counsel

Six agents rebuild chains, find clauses, read, count days and draft. Counsel and the deal team keep these calls.

No legal conclusion from an agentThe trigger reader proposes fires or does not fire, with its confidence, and counsel decides. The rule is locked in settings.
No reading without its pageThe clause finder reports only a clause it can point to, and an unread chain gets no proposal at all.
No one checks their own readingThe person who sent a reading to counsel has no way to sign it.
No recommended deal pathThe agents compare the structures. The associate general counsel approves one, after opening what stops it.
Nothing sent to a holderNotices and waivers are drafts for counsel. People send them, and the calendar keeper never does.

What land and legal teams ask about the preferential right to purchase

What is a preferential right to purchase?

A preferential right to purchase lets the other parties to a joint operating agreement buy an interest on the same terms before it is sold to an outsider. Whether it fires depends on the words as amended and on how the deal is built. Here agents propose a reading for each structure, and counsel signs it.

Is a preferential right the same as a right of first refusal in oil and gas?

They work alike, and many agreements use the terms loosely. What matters is the wording in that agreement and every amendment to it: what counts as a transfer, which exceptions apply and how long the holders have. The chain screen shows that wording at each amendment.

Does a parent share sale or a change of control trigger a preferential right?

Sometimes. A plain clause about selling an interest may not reach a sale of shares, but an amendment that adds indirect transfers can. A two-step deal also starts with an assignment, which can fire consents on its own. Answers on two-step structures are held below the word-by-word line for counsel.

What goes on the schedule of preferential rights and consents?

Only readings counsel has signed. Each row carries the agreement, the article, the holder, the window, the last day, the plan and a notice draft. Unsigned rows show as held, and a ruling or a new plan changes the schedule straight away.

Are a consent to assign and a change of control clause read too?

Consents, change of control clauses and preferential rights are read side by side on each structure. A consent with no affiliate exception shows firing at the first step of a share sale or merger, with the governing words beside it.

What if an amendment is missing?

The chain is marked as unable to be read through, with the reason, and nothing is proposed on it. The gap finder drafts a request to the holder or the operator. A person sends it, and counsel either closes the gap or accepts the risk.

How does this fit into oil and gas acquisition due diligence?

It covers the transfer terms in the joint operating agreements: rights to buy, consents and change of control. Government and lessor approvals stay on your own approvals list. The audit trail and an evidence file go to the deal record.

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Send us one old chain
with all its amendments.

Send us one chain and we’ll flip it across the structures your deal team is weighing.

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