Inspectioneering Journal

Managing Asset Transfers: Negotiating the Deal and Minimizing Risk

Part 2

By Brandon M. Watson, Esq., Attorney at GableGotwals. This article appears in the March/April 2014 issue of Inspectioneering Journal.
This article is part 2 of a 2-part series.
Part 1Part 2


In the January/February issue of Inspectioneering Journal, we discussed techniques routinely employed by Sellers to minimize certain risks associated with the sale of complex oil and gas assets. This follow-up article compliments the one published in the last issue by focusing on the techniques routinely employed by Buyers in the purchase of complex oil and gas assets, paying special attention to three sections found in most asset purchase agreements: (a) the Representations and Warranties, (b) the Covenants, and (c) the Indemnifications.

Representations and Warranties

How it Works: As mentioned in the last issue, asset purchase agreements typically contain exhaustive representations and warranties made by the Seller to the Buyer regarding the Seller’s authority to sell the assets, the condition of the assets, and any consents or approvals necessary to operate the assets. While the Buyer often also makes representations and warranties, those are usually routine and focused on the power and authority of the Buyer to enter into (and close) the transaction. For the Buyer, the Seller’s representations and warranties serve two important roles: (i) they allow the Buyer to learn more about the subject assets and "smoke out" any possible concerns and (ii) they allow the Buyer to receive contractual protection that the assets are in-fact what the Buyer anticipated when the letter of intent was first signed. 

How the Buyer Reduces Risk: The Buyer can reduce risk associated with the representations and warranties by "pushing back" on the various qualifiers used by the Seller (we mentioned in the last issue the use of materiality qualifiers, knowledge qualifiers and scheduling exceptions). If these qualifiers are agreed to by the Buyer, the Buyer will often permit their usage in only limited circumstances. In addition, with regard to knowledge qualifiers, the Buyer will try to cast a broad net around those representatives of the Seller who are deemed to have "knowledge"—not just relying on key executive officers.

This content is available to registered users and subscribers

Register today to unlock this article for free.

Create your free account and get access to:

  • Unlock one premium article of your choosing per month
  • Exclusive online content, videos, and downloads
  • Insightful and actionable webinars
Interested in unlimited access? VIEW OUR SUBSCRIPTION OPTIONS

Current subscribers and registered users can log in now.

Comments and Discussion

There are no comments yet.

Add a Comment

Please log in or register to participate in comments and discussions.

Inspectioneering Journal

Explore over 20 years of articles written by our team of subject matter experts.

Company Directory

Find relevant products, services, and technologies.

Training Solutions

Improve your skills in key mechanical integrity subjects.

Case Studies

Learn from the experience of others in the industry.


Inspectioneering's index of mechanical integrity topics – built by you.

Industry News

Stay up-to-date with the latest inspection and asset integrity management news.


Read short articles and insights authored by industry experts.

Expert Interviews

Inspectioneering's archive of interviews with industry subject matter experts.

Event Calendar

Find upcoming conferences, training sessions, online events, and more.


Downloadable eBooks, Asset Intelligence Reports, checklists, white papers, and more.

Videos & Webinars

Watch educational and informative videos directly related to your profession.


Commonly used asset integrity management and inspection acronyms.