Biggest transaction challenges
Outside counsel needs
Top lessons from the field
Words of wisdom
Participant profiles and demographics
About Steptoe & Johnson PLLC
Breaking ground, part two
DIGG
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DEAL
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The first edition of our Below the Surface shale gas research focused on legal challenges and costs in U.S. shales, particularly disputes and litigation. This follow-up study expands the field of respondents, takes a harder look at transactions and deals, and offers words of wisdom from major players in the shale plays. Explore more findings at research.steptoe-johnson.com.
A deeper look at transactions and deals
Breaking ground, part two
BREADTH OF INVOLVEMENT
Acquiring Land and/or Leases
Transporting Oil & Gas Field Products
Drilling
Supplying Water
Seeking Permits
Processing Oil & Gas Field Products
Producing Gas
Providing Drilling Equipment
Producing Oil
Other
Land Reclamation
Manufacturing
Real Estate Sales/Leasing
Breaking ground, part two
The majority of respondents’ companies are working in two shales and expect an increasing presence over the next twelve months.
0
10
20
30
40
50
60
70
80
88%
82%
80%
77%
68%
54%
44%
38%
29%
27%
10%
6%
8%
1005025 750
Less than half of the respondents’ companies are working in the shales below. As many as 16% expect to increase their presence in an area below.
68% 75% 23% 23% 35% 35% 29% 30% 24%Utica Shale
Marcellus Shale
Woodford Shale
Barnett Shale
Eagle Ford Shale
Niobrara Shale
Permian Basin
Bakken Shale
Haynesville Shale
DEPTH OF INVOLVEMENT
Dealmaking headaches are most often caused by title and real estate, regulatory, environmental, and government challenges. Respondents are most concerned about lack of clear or current title law, poor records, and increasing or changing regulations. These pressures show no sign of waning: 97% say the volume of challenges will be the same or increase in the foreseeable future.
Biggest transaction challengesMurky title law and changing regulations pose greatest challenge
100
50
75
25
0
23%
32%
74%
67% 62%
58%
Labo
r &
Empl
oy-
men
t
Title
& R
eal E
stat
e
Priv
ate
Fina
ncin
g
Reg
ulat
ory
Envi
ronm
enta
l
Gov
ernm
ent
3% Down
Biggest transaction challenges
Heirship and Legacy
Lack of Precedence or Poor Records
60% 37% UpSame
Lack of Clear or Current Title Law
PERCENTAGE OF RESPONDENTS NAMING THESE TRANSACTIONAL AREAS AS “MODERATELY TO EXTREMELY” CONCERNING
TOP CAUSES OF CONCERNWILL TRANSACTIONAL CONCERNS
INCREASE IN 2015?
Outside counsel needs
Nearly all of those working in U.S. shales engage outside counsel for title and real estate transactions; more than half do so often. Two-thirds engage outside counsel for regulatory transactions, and more than half use outside counsel for environmental and government relations needs.
Local experience wanted for transactions
Outside counsel needs
PERCENTAGE WHO USE OUTSIDE COUNSEL OFTEN OR SOMETIMES FOR
Title & Real Estate87%
5025 75 1000
Other Transactions58%
5025 75 1000
Regulatory67%
5025 75 1000
Environmental55%
5025 75 1000
Private Financing & Related Securities
43%
5025 75 1000
Labor & Employment
29%
5025 75 1000
Government50%
5025 75 1000
Top lessons from the field
Respondents offer specific guidance for newcomers with six categories of advice dominating the lessons learned. These areas range from “know what you’re getting into” to “attract competent employees and partners.” Also, respondents say good communication is key.
Knowledge is power
Top lessons from the field
GAUGING LESSONS LEARNED
33%
0
1020
30
40
Make Sure You Know What You’re Getting Into
15%
0
2010 30
40
Allow Enough Time and Resources
23%
0
2010 30
40
Establish Good Communication/PR/Local Relationships
3%
39%Up
Down
Same23%
0
1020
30
40
UnderstandState/Local Concerns
Attract Competent Employees& Partners
10%
20
30
400
18%
10
20
30
400
Use Legal Counsel
Words of wisdom
“Communicate. Communicate. Communicate.”
“Pay very close attention to outsales and well unitizations that could be holding
an old lease.”
“Rules vary state by
state—know your state.”
“Use local people whenever possible, especially for legal
counsel.”
“Develop a good process for vetting
title when evaluating a transaction.”
“Plan ahead, focus on details, and proactively
get out ahead of any key public issues.”
“Make sure you fully understand your issue before attempting to
resolve it.”
“There is a lot of misleading
information. Go directly to the
source.”
“A lot of people can produce oil and
gas, but not a lot of people make money doing it.”
Advice from the field
Words of wisdomWhen asked for their thoughts, respondents were forthright about their own experiences and lessons learned. Several of those comments are shared below. One favorite among other gems: “Understand what you know and don’t know about shale and gas development.”
“Implement a CYA approach and be
prepared to settle.”
Participant profiles and demographics
Shale players surveyed
A total of 176 individuals completed the online surveyfrom February 2014 through May 2014. They represent 119energy companies of varying sizes doing business inU.S. shales. Respondents are mostly landmen, in-house counsel, and executives with an average of just over 11 years working with outside counsel or legal issues in the field.
Participant profiles and demographics
INDUSTRY SECTORS
Oil & GasExtraction
35
52
17
70
0
Oil & GasConstruction
Providers of Oil & Gas
Title, Real Estate &
Land
Upstream(Exploration
& Production)
Consultant OtherTransporters of Oil &
Gas Field Commodities
Oil & GasPipeline
Oil & GasWell
Drilling
AAPLAcadian Land ServicesAnadarko Petroleum Corp.Antero Resources Corp.Apex Energy, LLCAssets InternationalAtlas Energy, L.P.Atlas Resource PartnersBertison-George, LLCBG GroupBHP BillitonBiehl Land Services, LLCBill Barrett Corp.Billman Geologic Consultants, Inc.Bonanza Creek Energy, Inc.BP Production CompanyBranzan Investment Advisors, Inc.BreitburnBrighton ResourcesCaddo Bay Energy, LLCCardno MM&AChesapeake Energy Corp.ChevronCitation Oil & Gas Corp.Columbia Pipeline GroupConoco Phillips CompanyCONSOL Energy/CNX GasCrestwood Midstream Partners
LIST OF RESPONDENTS
DaleDevonDominionDorado E&P Partners, LLCDrake Land Services, LLCEdgewood EnergyEMGEmpire Energy E&P LLCEnerplusEnervestEnvironmental Standards, Inc.EQT Corp.Ervin Equipment, Inc.Fedoris Enterprises, LLCFirstEnergy Services CompanyFlat Rock Development, LLCFreeport-McMoran Oil & GasGlobal Gas Law ConsultantsGraves & Co.Greenwood EnergyGriffin Petroleum CompanyGulfport Energy Corp.Harbinger LandHat Creek Energy LLCHess CorporationHonor Resources Co.Hunt Oil CompanyHuntington Bank
Independent Key Oil Company Marathon Oil MCDRS LLC McElvain Energy, Inc.McFarren Group LLC Memorial Resource DevelopmentMidwest Land ServicesMogul Energy International, Inc. Moody and Associates, Inc.Mountaineer KeystoneMRO NCPS NiSourceNoble EnergyNortheast Natural EnergyNorthwest Savings BankNuEnergy Operating, Inc.Pardee Resources CompanyPDC Energy, Inc.PennEnergy ResourcesPennsylvania General EnergyPercheron Pioneer Natural Resources Range ResourcesReserve Energy Rex EnergyRH USA
Rice Energy RKIRobert L. Bayless, ProducerSamuel Gary Jr. and Associates Sierra Buckeye Southwestern Energy Spectra Energy Statoil Stone EnergyTalisman EnergyTenaska Resources, LLCTexas Keystone, Inc. Total E&P USA, Inc. TRC Environmental Triana Energy True Oil LLC Ursa Operating Company LLCVanguard Natural Resources, LLC Vista Ridge Resources, LLC Vistar Oil Texas LLCVitruvian II Woodford, LLCWestern Land Services Wolverine Gas and Oil Corp. Wright ConsultingXOG Resources, LLC XTO Energy Inc.
Several respondents identify themselves with multiple sectors.
66% 41% 17% 13% 10% 2% 2% 2% 2%1%
0
25
50
ANNUAL REVENUE7%
40%
13%$50 - 99million
$100 - 499million
$500 - 999million
$1 billion+
Less than$50 million
10%
30%
Signs of naturally resourceful counsel
DEPTH & BREADTH OF ENERGY EXPERIENCE
30
75
Former in-house energy attorneys
Seasoned energy litigators
8,500Recent mineral title opinions
FERCIn-house FERC and public utility experience
Offices in key shale plays
$14BRecent transactions including SEC, private placements, MLPs, JVs
15
350Attorneys
Multidisciplinary emergency response team
Labor & employment attorneys
40
Dedicated DOTO team
220In-house land professionals
Years in the industry100+
20Nationally recognized environmental lawyers and professionals
Attorneys licensed in 23 states
1 of the largest Mineral Title teams in the country
steptoe-johnson.com/energy
About Steptoe & Johnson PLLC
DIG DEEP
research.steptoe-johnson.com