In the past two years, M&A activity in the upstream oil and gas space has seen an unparalleled wave of consolidation, much of which has focused on the Permian Basin and has occurred at a breakneck pace. We have also seen the start of the customary portfolio rationalization that is pursued by newly consolidated companies which are looking to divest their portfolios of non-core assets to enhance their financial health.
These transactions, both in the consolidation phase and the portfolio rationalization phase, can take the form of entity level deals (M&A) or asset level transactions (A&D). A common issue that we have helped clients address as part of these transactions is the necessity of interpreting and, in many cases, amending midstream agreements which do not fully or properly address what happens in the context of a merger or a divestment of dedicated assets.
In these transactions, the acquiring party will inherit midstream agreements that are either held by the target company that is being acquired or which run with the lands included in the properties being purchased.
In many cases (especially with older/legacy agreements) the agreements in play will not fully address, or are completely silent with respect to, how such M&A or A&D activity impacts the parties rights under key provisions of such agreement.
While most parties strive to identify these issues and, if possible, address them ahead of transacting, many times these issues have to be “cleaned up” after closing either because they are not detected, not fully understood, or not capable of being addressed prior to closing of the transaction.
Read more in the July 2025 issue of Oil and Gas Investor Magazine.
