Due Diligence & Title Opinions Flashcards

In the context of due diligence for a corporate acquisition of oil and gas assets, which of the following represents the broadest scope of review?

Answer: Examining title, contracts, environmental liabilities, regulatory compliance, and financial obligations

Corporate acquisitions require comprehensive due diligence covering title, contracts, environmental exposure, regulatory status, and all financial liabilities to assess true asset value.

A 'ratification' of an oil and gas lease is typically sought when:

Answer: A party who should have signed the original lease did not, but the company still wants to establish their interest under the lease

Ratification is obtained from a party who did not execute the original lease but whose interest is needed, confirming that the lease applies to their interest as well.

The 'doctrine of after-acquired title' (or estoppel by deed) benefits a grantee when:

Answer: The grantor acquires title to the property after conveying it by warranty deed

Under after-acquired title, if a grantor conveys property by warranty deed while owning no title, any title the grantor later acquires automatically passes to the grantee.

Which type of recording act provides the greatest protection to a bona fide purchaser who records first, regardless of actual notice?

Answer: Pure race statute

Under a pure race statute, the first party to record wins, regardless of whether they had actual or constructive notice of a prior unrecorded conveyance.

A 'well-to-well' or 'well-by-well' Pugh Clause in a lease that has been partially pooled operates to:

Answer: Hold only the acreage within a pooled unit by production from that unit's well

A well-by-well Pugh Clause limits the lease's hold to only the acreage within the specific pooled unit containing the producing well, releasing all other acreage.

When performing due diligence on a prospect, the landman identifies 'unleased mineral interests.' The correct approach is to:

Answer: Identify the owners and attempt to lease or negotiate a participation agreement before drilling

Unleased mineral interests belong to owners who have not granted drilling rights, so the landman must identify and approach them for leasing or participation before operations begin.

A title examiner notes that a mineral deed in the chain of title was executed by an attorney-in-fact under a power of attorney that has since been revoked. This means:

Answer: The deed may be void or voidable if the revocation was effective before the deed was executed

If a power of attorney was revoked before the attorney-in-fact executed the deed, the agent lacked authority and the conveyance may be invalid, creating a title defect.