Due Diligence on Nigerian Upstream Acquisitions: Red Flags to Watch

Nigeria's upstream market has seen a wave of asset sales as international companies divest and indigenous companies expand. Good assets are available, but so are expensive mistakes. Combining forensic accounting with upstream advisory work, I focus diligence on the issues that most often destroy value.

Title and regulatory standing

• Is the licence or lease valid, in good standing and correctly held by the seller?
• Are ministerial and regulatory consents for the transaction obtainable, and on what conditions?
• Are there unpaid royalties, rents or regulatory penalties?
• Is the asset compliant with conversion and other requirements under the Petroleum Industry Act?

Technical reality

• Do independent reserves reports support the seller's numbers?
• What is the condition of wells, flowlines and facilities?
• How reliable is the evacuation route, and what are the losses and downtime?

Financial and contractual exposure

• Hidden liabilities: decommissioning obligations, environmental claims, community agreements, tax disputes.
• Crude offtake and financing agreements with change-of-control triggers.
• Joint venture partner rights, including pre-emption.

Integrity checks

Corporate intelligence on sellers, partners and intermediaries is essential. Opaque ownership, unexplained commissions or pressure to skip normal steps are warning signs.

Community and environment

Host community relations, spill history and remediation obligations affect both operations and reputation. They also carry financial consequences under the Petroleum Industry Act.

A due diligence checklist

• Legal: licence documents, consents for assignment, ministerial and NUPRC approvals, encumbrances and disputes.
• Technical: independent reserves report, production history, well integrity, facilities condition and maintenance records.
• Evacuation: pipeline access agreements, tariffs, historical losses and downtime, alternative routes.
• Financial: audited accounts, tax position, royalties, cash calls owed to joint venture partners and contingent liabilities.
• Environmental: spill history, remediation obligations, gas flaring penalties and decommissioning costs.
• Community: host community agreements, trust contributions under the Petroleum Industry Act and any ongoing disputes.
• Integrity: beneficial owners, sanctions screening, politically exposed persons and anti-corruption history.

Structuring around risks

Due diligence findings should shape the deal. Price adjustments, specific indemnities, escrow accounts, conditions precedent (such as regulatory consent) and deferred consideration linked to production can allocate risk fairly. A finding is not necessarily a reason to walk away; it is information that should be priced and protected against.

Why divestments raise the stakes

As international oil companies sell onshore and shallow-water assets, more Nigerian buyers are acquiring mature fields with long operating histories. These assets can offer strong cash flow, but also aging facilities, environmental legacies and complex community relationships. Thorough due diligence is how buyers avoid inheriting problems they did not price.

A leader's view: integrate technical and financial teams from day one

Acquisition teams often split into workstreams that rarely talk: engineers review reserves and facilities, lawyers review title, accountants review the numbers. Each produces a report, and the investment committee is left to reconcile them. Important connections are missed. A facilities finding that requires major repairs changes the capital budget; a community dispute affects production forecasts; an outstanding cash call changes the price.

The better approach is one integrated team with a shared issues list. Every finding is assessed for its effect on value, timing and risk, and fed into a single financial model. Weekly meetings bring the workstreams together. The investment committee receives one view: what we are buying, what it is worth, what could go wrong and how the deal protects us.

Leaders should also plan beyond closing. The first hundred days after acquiring an upstream asset decide much of its value: retaining key field staff, stabilising production, engaging host communities, meeting regulatory filings and putting controls in place. A due diligence process that identifies these priorities early gives the new owner a head start. This combination of technical and financial perspective is the foundation of how we approach upstream opportunities at Haricot Energies.

Bring it together

The best diligence connects technical, legal, financial and integrity findings into one valuation and one negotiation strategy. That integrated approach is what we bring at Haricot Energies.

Common questions

What should buyers check in a Nigerian oil asset acquisition?

Licence and title, regulatory consents, reserves, facilities, evacuation, financial and tax exposure, environmental and decommissioning liabilities, community agreements and integrity of counterparties.

Does an upstream acquisition in Nigeria need regulatory approval?

Yes. Assignments of interests in petroleum licences generally require consent from the relevant authorities, including the NUPRC, under the Petroleum Industry Act framework.