Michael Byrd Quoted by Bloomberg on Use of Earnouts in Oil and Gas Deals
Akin Gump oil and gas partner Michael Byrd is quoted in the Bloomberg News article “Oilpatch Drillers Are Betting Billions on Later Payouts to Make Deals Today.” The article looks at payouts known as earnouts or contingent payments, which, as it is reported, have become much more prevalent this year as many “hedge their bets on the future of shale.”
“I sometimes suggest them as alternatives to my clients,” said Byrd, who advises on oil and gas deals. “They are used to bridge the bid and ask.”
According to the article, two dozen oil and gas deals in the United States and Canada with a combined value of more than $25 billion have included earnouts this year. There were only nine such deals, totaling more than $5 billion, during the same period last year. That big jump, the article says, coincides with a slump in dealmaking in 2017, and earnouts are designed to address the uncertainty created by the volatility.
“In some cases, they are used to reduce exposure to large commodity price swings,” Byrd said. “While in others, they are used to protect against uncertainty as to the future development potential of currently undeveloped acreage.”