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Surviving Acquisitions and Divestitures - A Guide for O&G Professionals

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Surviving Acquisitions and Divestitures - A Guide for O&G Professionals

Acquisitions and Divestitures (A&D) are a part of the asset allocation strategy for oil and gas companies and are constantly evaluated on both a short and long-term basis. Oil and gas companies seek to acquire assets that maximize core competencies and increase shareholder value. Operators look for assets where geological knowledge of formations is available, and where technical expertise in specific plays can be leveraged for higher margin recovery. Companies divest assets to raise funding for existing asset development or to acquire new assets more closely aligned with long-term strategic goals.

In recent months there has been a surge of A&D activity including ExxonMobil acquiring Denbury's Bakken oil assets for $1.6 billion in order to increase their stake in U.S. unconventional oil. BP divesting mature assets in the Gulf of Mexico (GOM) (to reinvest in ultra-deepwater GOM), which Plains Exploration & Production Co. is acquiring in an attempt to shift attention from natural gas to offshore oil. Energy XXI is also acquiring shallow water GOM assets from ExxonMobil as the company continues to expand its offshore drilling program for 2013.

Although acquisitions and divestitures can be beneficial for companies, they can significantly affect the workforce of companies involved in both sides of the transaction. This post will address the most common scenarios that oil and gas professionals will have to face, as well as tips for dealing with employment changes during A&Ds.

How do acquisitions and divestitures affect Oil and Gas Professionals?

When a company divests an asset, several things can happen to the professional's position. Often, the individual will be asked to transition along with the assets to the acquiring company; however this may require a relocation, which some professionals will accept and others will turn down favoring to remain in their present location. The divesting company may encourage current employees to go to the new company if the option is available, otherwise they will be terminated. Senior executives and long-term employees may be offered the option to take a retirement package instead of relocating. Lastly, the professionals at the acquiring company may not agree with the new strategies or direction a company takes after an A&D and may also voluntarily leave or take retirement.

What should Oil and Gas Professionals do?

Acquisitions and divestitures are commonplace in the oil and gas industry, so professionals in this field should always be ready with a plan of action. Although there may be a notice of several months prior to finalizing the deal, in many cases the organizational structure is not formalized until after the closing date, which creates a level of uncertainty in whether or not they will get an offer from the acquiring company or maintain their current position.

Unfortunately, many people don't start looking for a job until after transitioning out of their role. Then, they must enter and compete in the job market at the same time, including laid off professionals, those who do not accept an offer from the acquiring company, and professionals from the acquiring company who resign. Competition for jobs will be fierce and consequently pay may be much lower. So, our first tip is to understand the assets affected in the transaction, senior management involved, and any professional and cultural differences that can influence career development in the new organization.

Our second tip is to check location. Location can be a deal breaker for professionals who are offered a position at the acquiring company. If you get an offer from the acquiring company, find out if you will need to relocate. Do some research into the area and decide early whether or not you are willing to move.

Thirdly, professionals with more than 15 years experience should consider taking the exit offer and reentering the workforce as a highly compensated knowledge-based consultant. Taking a retirement offer doesn't have to be the end of your career.

Lastly, it's important to continuously network within industry circles to know about projects that are a fit for your skills and experience and making the contacts that can get you in front of hiring managers. Information gained from networking can lead to an easier job transition during an A&D.

Preparation makes for an easier transition

A&Ds are inevitable in the oil and gas industry, and most professionals can expect to work for several companies throughout their career. Preparing for this transition can make finding a new opportunity easier and might even result in a higher paycheck. You can prepare for A&Ds by learning about the companies involved in deals that affect you, and networking with industry professionals that can help you quickly transition to a new project.

Clover is an industry leader in placing petrotechnical professionals in the oil and gas industry with 16 years' experience working with the largest operators in the world. For additional information please contact Ron Nickelson at ronnickelson@clovergs.com.

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