The majority of title issues in oil and gas transactions can be analyzed and cured or priced into the deal. They may affect structure, timing, or economics, but they rarely kill a deal by themselves.
There are, however, a few title problems that consistently prove difficult to overcome. One obvious deal killer (or partial killer) is lack of ownership in the record, either in the context of leasehold ownership or mineral ownership.
In working interest leasehold ownership scenarios, whether the seller actually owns the working interest being marketed in the core development acreage is, at times, hard to pin down due to missing assignments in the leasehold chain, or assignments that are present, but contain language that is ambiguous or based on facts not in the record (i.e., if the lessee does not drill a well within a certain period, the leasehold reverts to the assignor). If the ownership cannot be confirmed with enough confidence to support the planned drilling program, the buyer is left underwriting something fundamentally unclear, and those portions of the deal should fail absent solid curative actions.
Another is when a significant portion of the acreage thought to be held by production turns out not to be HBP. If leases critical to the development plan have expired or were never properly maintained, the asset being acquired may be materially different from what was marketed.
Title issues can also become fatal when a previously overlooked burden or reservation materially reduces the working interest or revenue interest in the key development zones. At that point the economics of the asset may no longer match the original assumptions.
Occasionally the problem is structural rather than economic — for example, where competing chains of title or unresolved ownership disputes create a level of uncertainty that cannot be resolved within the timeframe of the transaction.
Most title issues can be addressed through structure, curative, or pricing adjustments. But when the problem affects the fundamental ownership or control of the development acreage, transactions become much harder to complete.