What to do when your energy takeover target has undisclosed non-compliance issues

Introduction

Queensland's coal seam gas (CSG) boom spurned a flurry of international takeovers in the last decade. The multi-billion dollar LNG export projects being developed near Gladstone by British Gas, Santos's GLNG and Arrow Energy all began when global oil majors bought locally listed companies for their upstream gas reserves.

In many cases, the strategy of these international petroleum houses, which are some of the biggest companies globally, was to buy minority shares in the targets' exploration tenements. This provided them with insight and information about the company's performance, 'social licence to operate' and, importantly, compliance with local laws and regulations.