With last week’s announcement of the largest oil-and-gas merger in years, ExxonMobil’s $60 billion acquisition of Pioneer Natural Resources, yet another wave of consolidation of oil-and-gas operators is upon us. Earlier this year, Chevron acquired PDC Energy Inc. in a merger valued at $6.3 billion. And just last week, Civitas Resources—itself the product of four oil-and-gas operators—announced an acquisition of Permian Basin assets worth $2.1 billion. Of course, this follows significant M&A activity over the last several years.
And more may be on the way. The Wall Street Journal has reported on Chevron’s recent interest in Occidental, and Kimmeridge Oil & Gas’s July 2023 white paper advocates for more consolidation by public oil-and-gas companies.
What does consolidation mean for litigation?
Setting aside the substantive issues specific to deal agreements and particular fact patterns, as well as securities strike suits, oil-and-gas companies in the diligence period for mergers or significant asset acquisitions or divestitures should bear in mind a few things with respect to threatened or active litigation:
- Preserve the key documents now. Even if you arguably don’t yet have a preservation obligation, preserving even for a remotely possible lawsuit ensures you will still have the documents needed to prosecute or defend a claim.
- Consider collecting documents now. Depending on transitions between IT systems, emails and other electronic documents may be less accessible after closing.
- Interview internal witnesses and document custodians. Operators merge to gain efficiencies, which usually means some kind of reduction of back-office staff and perhaps others. Interviewing employees with relevant knowledge now not only helps preserve their information—it’s fresher now than it will be in a year and in another job—but you may form a good working relationship that outlasts an employee’s departure. Former employees are often unwilling to help, forgetful, or some combination of the two. These interviews are especially important for anyone in a technical or finance role. If their complex work won’t be easily (and cheaply) understood by other employees or expert witnesses, then interviews should dive as deeply as possible with such employees.
- Pursue your factual investigation. Litigation holds and early collections are the baseline. But if you lose your witnesses, and the ability to dig into the next level of documents—which you may not have understood as necessary at the preservation or collection stage—you may limit your ability to marshal your best evidence. Of course, this step will depend on the value of the case, and the client’s appetite to incur early fees.
Each situation is different, and requires the attention of experienced energy litigators.