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Upstream Due Diligence

Upstream due diligence that lays each well's reserve report, operating statement, production and regulator status side by side, and prices what disagrees.

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Follow one well from 8:12 to a signed step ↓
The problem

Four folders, four readers, and nobody holding one well's records together

The data room opens, and bids are due a few weeks later. The reserve report goes to the reserves engineer, the lease operating statements to the cost analyst, title to land, and the regulator's records to whoever has an hour. Each person reads a folder, and nobody reads a well.

So a well the report books as producing can show no lifting cost for a year and a shut-in status on the regulator's current list. It still sits in the number you bid. Lifting cost creeps above the report lease by lease, a partner's back-in after payout never reaches the economics, and plugging orders stay outside the costs.

Built forAcquisition deal leadsReserves engineersLand and title analystsOperating cost analysts

The Problem Today

Each specialist reads one folder, so a well booked as producing that has been shut in for a year reaches the bid.

1,377
hours to read 41,300 documents once; the team has 480 our estimate
$41,139
average to plug one orphaned well, across 27 reporting states published

Read by hand, folder by folder

  • Reserves
  • Statements
  • Production
  • Title
  • Volumes that hide a shut-inLease oil split by an old well test keeps it alive
  • Costs the report leaves outPlugging orders and higher lifting cost go unpriced

The Solution

  1. Every folder read at onceReserve report, statements, production and regulator records, per well
  2. Four witnesses side by sideA contradiction stated plainly, each witness quoted from its page
  3. Priced as a proposalEach contradiction priced at the seller's own deck, for people to reject
  4. Two people sign each stepA specialist agrees each well; the lead signs the step after a sample

Built-in controls

  • No step is signed before its sampled wells are opened
  • Agents never send a question to the seller
  • Price deck locked to the seller's for the bid

What You Get

The deal team bids from a number it can follow back to a well, with each step signed by a person.

  • What the room cannot answerGaps become drafted questions to the seller, on its clock
  • Fresh public records readA new regulator list turns a doubt into a priced step
  • A bid memo built from signaturesEach number in it traced to a signed step
Day 9 of 21, by the audit trail

Upstream due diligence on well L-207, from one doubt to a signed step

A seller's onshore oil package of 1,486 wells and 41,300 documents, on day 9 of a 21-day room. One well booked at 35.2 b/d has cost nothing to run for over a year.

demoPackage, wells, names and numbers in this case are all sample data.

  1. 018:12

    Day 9 of 21, and $612.0M falls to $564.0M if every proposal holds

    Acquisitions deal lead

    The bridge drops from the seller's reserve value in seven steps, each a group of wells whose own records disagree. Steps 2, 4 and 7 are signed, for $591.2M; 5 and 6 wait on the land and cost analysts. Beside it: 58 wells the room cannot answer, 127 doubts, and one doubt the agents flag as worth a challenge.

  2. 02Before the challenge

    Booked at 35.2 b/d, with no lifting cost for 14 months

    Reserves engineer

    L-207 opens with four records quoted from their pages. The report books it producing. Its operating statement shows nothing spent on electricity, pumper or chemical for 14 months. Production still gives it an 11.26% share of Lease 12, set by an old test, and the only regulator copy in the room says producing. One witness off is a doubt, so nothing is priced.

  3. 038:16

    One challenge sends the agents to the regulator's list and the well file

    Reserves engineer

    Rather than accept the doubt or drop it, the engineer challenges it, and the agents show each step as they take it. On the regulator's current public list, 1,480 rows, L-207 is shut in, mechanical. A second search of the well files finds an AFE filed under the battery rather than the well: a casing leak at 2,140 ft, $485,000, never approved.

  4. 048:20

    After one repair call, the lease statement reads $0.00 in each column

    Reserves engineer

    Each witness opens the page it quotes. Lease 12's operating statement shows a normal month, a $6,850 pulling unit call for parted rods, then $0.00 for electricity, pumper, chemical and repairs month after month. A running well costs money. It is the lease operating statement review a cost analyst does by hand, set beside the other three records.

  5. 058:24

    Shut in for a mechanical reason, so it is priced as repaired, at $711k off

    Pricer, for the reserves engineer

    Three witnesses now say the well is down, at 96% confidence. Shut in for a mechanical reason, it still carries value as developed non-producing. So the step takes the producing value, $3,762,685, less the value once repaired, $3,051,566, with the $485,000 repair in month 9, all at the seller's own deck.

  6. 068:28

    31 of 31 agreed, and the signature stays locked until three wells are opened

    Acquisitions deal lead

    The engineer agrees L-207 with a reason, and step 1 reads 31 of 31 agreed, −$3.3M. Signing falls to the deal lead, and the button stays grey: 3 sampled wells still to open, the largest first, with no timer to wait out. Rejected wells join the same sample, since a rejection puts value back on the bid.

  7. 07Before signing

    The sampled well opens with all four records and the price under them

    Acquisitions deal lead

    From the sample, L-207 shows what the engineer saw: the report's 35.2 b/d, the statement's empty months, the allocated volumes and the regulator's shut-in line, with the comparer's statement and the price beneath. The lead reads it, closes it, and opens the next sampled well at −$118k, then the third at −$67k. Now the sign button works.

  8. 088:32

    Signed with Q-07 still open, and the reason goes on the record

    Acquisitions deal lead

    Step 1 is signed after 3 sampled wells were opened. Q-07, asking the seller for workover history on the shut-in wells, is still open, so the signature carries a stated reason: the answer can only lower the step. Nobody signs a step where they agreed a well, and a signed step reopens only if new evidence adds a well.

  9. 09After 8:32

    $587.9M signed, $563.3M at the end of the bridge, and step 3 is next

    Acquisitions deal lead

    Back on the bridge, the signed value reads $587.9M and the end of the bridge $563.3M, traced to 463 wells and 7 locations. Doubts fall to 126. The challenge also drafted a question on three wells the regulator lists and the room never mentions, making 24. Next on the panel: step 3, agreed and ready for its signature.

L-207 keeps most of its value once repaired, and $711k comes off the bid

At the seller's deck: oil $72.00 flat less $3.40, gas $3.20 per Mcf, taxes 6.0% of revenue, discounted at 10% a year, mid-month.

Producing value, as the reserve report books it35.2 b/d declining 6.5% a year, 497 months to the economic limit, 184,398 bbl$3,762,685
Value once repairedThe same forecast restarted in month 9, after a $485,000 casing patch and new rods− $3,051,566
Off the bridge for L-207Each well is rounded to $1,000−$711k

demoSample data, from the working solution.

Seven steps from the seller's $612.0M to $563.3M, each one a group of wells

Totals on day 9, after step 1 is signed.

StepWellsChange in value
1. Booked producing, records say shut in31−$3.3M
2. Lifting cost above the report212 on 18 leases−$14.2M
3. Decline faster than booked138−$14.1M
4. Partner back-in not in the report46−$9.7M
5. Lease ends before the planned well7 locations−$7.9M
6. Plugging orders not in the costs27−$2.6M
7. Producing, valued at zero9+$3.1M
End of the bridge463 wells, 7 locations$563.3M

demoSample data, from the working solution.

Around the bridge

The data room, the seller's questions and three more steps behind the bid

Other desks on the same package. Any screen enlarges with a click.

Audit trailPerson, time, reason and step for each decision: the challenge at 8:16, the list at 8:20, the price at 8:24, the agree at 8:28, the signature at 8:32.
The sum behind −$711kBoth cases month by month at the seller's deck: 497 months to the economic limit and 184,398 bbl remaining, with the engineer's check of the 2.39 b/d limit.
The room, folder by folder41,300 documents: 40,486 read, 588 copies set aside and 226 held, each held file with its reason and a question to the seller.
Questions to the seller24 questions: 11 answered, 8 on the seller's clock and 5 drafts. The agents draft from wells the room cannot answer, and only the deal lead approves and sends.
Lifting cost, lease by leaseStep 2, −$14.2M: the report carries $3,600 a month where trailing 12-month statements run 34% to 38% higher. Signed after 8 sampled wells.
A back-in nobody pricedStep 4, −$9.7M: a farm-out gives a partner 25% after payout, payout came, and the seller now holds 75% on 46 wells the report carries at 100%.
Leases that end before the rigSeven locations whose lease ends before the planned spud, with no extension in the room. Each is proposed off at its value, $611k to $1.75M, and land rules on it.

demoSample data, from the working solution.

The people

Who agrees a well, who signs a step and who signs the bid basis

Specialists decide wells, the lead signs steps after opening their samples, and neither signs what they decided.

Reserves engineer
Sees
Status, decline and missing-well steps, with four records per well
Signs
Agrees or rejects each well, with a reason, or challenges a doubt
Land and title analyst
Sees
Interests, back-ins and lease terms against the planned wells
Signs
Agrees or rejects each interest and lease step
Operating cost analyst
Sees
Lease operating statements, lease by lease
Signs
Agrees or rejects lifting cost and plugging steps
Acquisitions deal lead
Sees
Each step's sampled wells, opened before the sign button works
Signs
Each bridge step, and each question before it reaches the seller
Head of new ventures
Sees
The bid memo, built only from signed steps
Signs
The bid basis, after opening the largest step's sampled wells
Internal auditor
Sees
The whole trail, each reason with its page, read only
Signs
Nothing, and can act on nothing
Who reads what

Eight agents work through the room, and not one can move the bid

They read, match, compare, price and draft. People decide.

Folder reader

Opens each document, files it by folder, sets copies aside and gives a reason for any it cannot read.

  • Never edits or deletes a seller document
Well matcher

Ties each document to one well across seller names, regulator numbers and lease numbers.

  • Never merges two wells on a weak match; those go to land
Reserves reader

Reads the report's one-line economics: category, rate, decline, interests and lifting cost.

  • Never re-forecasts a well
Statement reader

Reads lease operating statements by lease, well and month.

  • Never fills in a missing month
Production and status reader

Reads production history, measured or allocated, and the regulator's status, orders and permits.

  • Never treats an allocated volume as measured
Witness comparer

Sets a well's four records side by side and states any contradiction, quoted, with a confidence.

  • Never decides
  • Below its confidence line it raises a doubt
Pricer

Prices each contradiction at the seller's deck as a proposed step on the bridge.

  • Never changes the price deck or a person's ruling
  • Never credits value the room does not support
Question drafter

Drafts a question to the seller for what the room cannot answer.

  • Never sends; only the deal lead approves sending

Questions acquisition teams ask about upstream due diligence

What is upstream due diligence?

Upstream due diligence is the buyer's technical and commercial check of an oil and gas package before a bid: reserves, operating costs, production, title and the regulator's records. This solution reads the seller's data room, puts each well's records together, prices each contradiction at the seller's deck as a step for people to agree or reject, and keeps the signed trail through to the bid memo.

What belongs on an oil and gas due diligence checklist for a producing package?

The reserve report and its economics, lease operating statements, well-level production, title and contracts, well files, maps and the regulator's records. Here they are read per well as well as per folder, so a contradiction that takes two folders to see, such as a booked producer with no lifting cost, comes up as one line with both pages quoted.

How does it treat a well booked as producing that is shut in?

A well shut in for a mechanical reason is developed non-producing, restorable at a cost. So the step takes the producing value less the value once repaired, after the repair cost and the delay, and the well keeps the rest.

Whose price deck does it use?

The seller's, locked for the bid, so each step measures evidence in the room. Your own price view stays in your deal model.

What happens to the wells the data room cannot answer?

The agents draft a question to the seller for each gap, such as missing statements, missing production or an unreadable report page. Only the deal lead approves and sends, and a sent question runs on the seller's clock from the process letter.

Can a step be signed without anyone reading the wells?

No. Specialists decide each well first. A sample is drawn from the step, largest wells first, and its signer must open every one before the sign button works. Rejected wells are in that sample as well.

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Send us a reserve report
and a year of lease statements.

We'll set its wells' records side by side and price what disagrees at the seller's deck.

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