Moving into O&G M&A - what should I know before day 1?
Most of my experience so far has been in corporate finance, but largely in thematic teams (sustainable finance / energy transition etc.) rather than traditional sector M&A.
I’m moving into O&G M&A soon and trying to work out what I should be getting up to speed on before I start.
For anyone in O&G IB / M&A, what tends to be the biggest learning curve? I’m assuming reserves / NAV modelling, upstream economics, valuation conventions, basin / asset metrics etc., but interested in what actually matters most once you’re on the desk.
Also, any good resources you’d recommend for getting up to speed? Books, primers, modelling materials, industry reports, newsletters, anything like that.
Would also be interested in hearing how the day-to-day compares with more general corporate finance work, and anything you wish you knew before starting in the sector.
Jumping into Oil & Gas M&A is an exciting move, and there are a few key areas to focus on to hit the ground running. Based on the most helpful WSO content, here’s what you should prioritize:
Key Areas to Master:
Reserves and NAV Modeling:
Upstream Economics:
Valuation Conventions:
Commodity Markets:
Recent Deals and Trends:
Technical Knowledge:
Resources to Get Up to Speed:
Day-to-Day Differences:
Final Tips:
Good luck with your transition into O&G M&A! It’s a challenging but rewarding space with plenty of opportunities to grow.
Sources: Breaking into Oil & Gas / Energy as a UG, Oil&Gas interview, Oil and Gas Overview, https://www.wallstreetoasis.com/forum/investment-banking/qa-md-in-ma-and-capital-markets-with-bulge-bracket-and-boutique-experience?customgpt=1, How real is the pigeonhole?
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Congrats on the move.
Questions for you -
Primers: There's quite a few within this link. Many are older but they tend to be Global, and comprehensive enough. https://www.dropbox.com/sh/4dwx2ln3pzyjdnx/AAAkP-d15pZh8-PmS5oZ-AVRa?dl=0Books:
Note: These may be more U.S.-centric than you're looking for but could give you an idea of what I've heard to be useful.
You'll pick up modeling-specifics on the job but for a quick primer I think
from M&I would suffice (you prob already know 99% of this really). He has a few others you may find of value in getting up to speed (formatting text on this site is atrocious, apologies for the wonky text).You probably already know this, but find someone who is good at their job when you start and have them mentor you on all of the important pieces from day 1. You'll save a ton of time if you can find someone to do this with. As with most industries, it seems things like basin knowledge isn't easily just read about.. so much in this industry I've found comes from who you talk to.
Best of luck to you, OP.
Hey! Thanks very much for the response, and the kind words.
Whilst the team is based in London, the role is global and predominantly upstream-focused, although it’s fairly broad so we can cover the wider O&G value chain.
I’ve read through the infamous Deutsche Bank primer and I’m currently reading The Prize, which has been useful for getting a better feel for the industry more broadly.
I’m fairly comfortable with what I know and don’t know when it comes to the basics - modelling, industry fundamentals, reserves classifications, etc. I’m more interested in whether there are areas outside of the obvious technical / modelling work that are worth getting familiar with before starting.
For example, things like PSCs / fiscal regimes, royalty and tax structures, JOAs / working interests, reserve reports, marketing arrangements, or just how assets are structured in different jurisdictions. Were there any areas like that which you found took a while to get your head around once you started working on deals?
Order of operations. Learning how to access/understand reserve reports >>> 90% or the other randomness
Hey, what eactly of the prize are you reading?
Are you able to share a link?
Ldn based oil banker here - Apart from the obvious industry specific things, if you are covering the world from London (as I am), each jurisdiction has different fiscal and tax regimes which vary massively (e.g. PSC, Tax & royalty, straight royalty etc). Understanding how each of these arrangements work and are modelled is crucial to valuing assets in each jurisdiction. Each countries fiscals have different treatments for tax, D&A, cost recovery etc...
O&G is interesting, but will the career still be there in 20 years or so? (question from a complete noob in OG)
I love energy and the transition generally, so I’m probably a little more optimistic than your average Joe, but I still see O&G making up a meaningful part of the energy mix in 20 years. And even as that mix shifts, it’s hard to see hydrocarbons not remaining important in areas like petrochemicals, aviation and shipping.
The industry will obviously look different, but I don’t think that necessarily means the career disappears with it.
Just know you're cooked bro
mass balance (i'm only downstream)
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Oil is formed from prehistoric microorganisms.
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Congratulations on the new role! I think you need go at it with an open mind. O&G can be pretty complex, and will have its modelling and evaluation nuances between upstream / midstream / downstream and OFS. In the US, You will do a more work on asset M&A models than corporate M&A models, but there’s flavors of both. If you are going to a bank with an A&D team, they will handle a large part of NAV models for upstream. You will need to model, but you will use a lot of their technical inputs. Midstream and downstream are more infrastructure like and are governed by fixed offtake, and typically a stable cash flow profile. There are a lot of JV/ SPV structures in there, that I would try and get upto speed on. Overall a lot of the industry has already consolidated and large M&As are disappearing. You will have a lot more work on the asset M&A. But the AI / DC situation is driving renaissance in the O&G business, and a lot of midstream / OFS companies are exploring BTM Power as their next targets and evaluating those platforms. Also you will deal with a lot of foreign capital trying to buy assets in the US. All in all a solid experience, and it will be around for many years to come
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