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Oil and gas assets in Alberta are not like buying a building. Rights come from Crown leases or freehold titles, wells and facilities carry regulatory licences, and the buyer inherits obligations as well as production. That is why these deals lean heavily on due diligence.
The core documents
Most asset sales run on a purchase and sale agreement that sets the price, the effective date and what is being transferred, with schedules listing leases, wells, facilities and contracts. Buyers and sellers negotiate representations and warranties, conditions to closing and how price adjustments are calculated between the effective date and closing.
Where the assets are held in a company, the deal may instead be a share purchase, which brings different tax and liability consequences.
Due diligence buyers focus on
Title and lease status, the terms of surface and mineral rights, third-party contracts such as processing and gathering agreements, and joint venture or operating agreements. Environmental and abandonment and reclamation liabilities are a central concern in Alberta.
Licensed wells, pipelines and facilities cannot simply change hands. Transfers of regulatory licences generally need the approval of the Alberta Energy Regulator, and the buyer’s ability to meet its liability obligations is part of that review.
Timing and approvals
Closing conditions often include regulatory approvals, consents from counterparties and, in larger deals, competition or foreign-investment clearances. Building in enough time for these is one of the most common practical lessons for first-time buyers of Alberta assets.
Negotiate what happens if an approval is delayed: outside dates, price adjustments and who bears the carrying costs.
Before you sign a letter of intent
- Decide whether you are buying assets or shares, since it changes tax and liability.
- Ask for the regulator licence list and the abandonment and reclamation estimates early.
- Identify third-party consents and preferential rights that could block or delay closing.
- Agree who bears the risk if a regulatory approval arrives late.