Navigating unclaimed property risk to unlock oil and gas deal value 

After years of cost-tightening, bankruptcies and regulatory pressure, the oil and gas (O&G) industry is back in growth mode. Surging optimism, improved cash flow and a friendlier policy environment are fueling a spike in merger and acquisition (M&A) activity. But while producers are busy repositioning and expanding, there’s a risk flying under the radar — unclaimed property (UP). And it’s not just a paperwork problem. Missed liabilities from unrecovered mineral interests, dormant balances, or aged checks could cost acquirers millions.

The Comeback Trail

O&G producers spent the past several years cutting costs, shedding non-core assets and restructuring. Those that survived the downturn are now reaping the benefits of tighter operations. With a stronger balance sheet, many are turning to M&A to strengthen core production areas and shed lingering distractions. That’s the good news.

The not-so-good news: this renewed deal activity is quietly dragging a persistent liability back into focus. Revenue suspense balances — essentially funds owed to owners of mineral interests but stuck in limbo — can turn into unclaimed property if left unresolved too long. And that can trigger compliance obligations, audits, penalties and painful post-deal surprises.

What is unclaimed property?

Every U.S. state (and several Canadian provinces) requires companies to report unclaimed property — funds owed to someone else that have gone unclaimed for a statutory “dormancy” period. These obligations are not taxes, but they are legally binding and failure to report can lead to audits and steep penalties.

Common examples include uncashed checks, customer credits and for O&G companies, revenue suspense balances. These often arise when royalty owners pass away, interests are tied up in probate, or mailing information is incomplete.

The rules are complex. Priority rules dictate where property should be reported — first to the owner’s last known address and if that’s unknown, to the company’s state of incorporation. Some states have even more nuanced rules for oil production proceeds.

M&A meets unclaimed property

Unclaimed property exposure becomes particularly risky in the context of M&A.

In a stock acquisition, a buyer inherits all assets and liabilities — whether known or not. In theory, buyers expect this and conduct robust diligence. In practice, unclaimed property often gets overlooked, especially suspense balances buried in outdated systems or tied to decades-old transactions.

In an asset acquisition, buyers may think they are leaving liabilities behind. But that is not always the case. Acquirers might unknowingly take on aged balances, unresolved joint interest billing credits, or voided checks that were incorrectly handled.

The biggest problem? Many targets themselves do not realize they have unclaimed property issues.

A trap for the unwary

Voided checks are a common trap. Companies often void checks due to age or bank account changes — but unless properly resolved, those funds may still be considered reportable property.

Revenue suspense is an even bigger landmine. Companies may inherit balances that have not been reviewed in years. And because many states follow “pay-to-current” rules, where one old balance triggers the need to report all related funds across interests, even a small oversight can balloon into a massive liability.

Making matters worse: once the deal closes, access to historical data — and the people who understand it — often disappear.

Why O&G is especially vulnerable

All industries generate unclaimed property. But in O&G, the complexity is off the charts.

Take title issues: revenue can get stuck for years due to ownership disputes or multiple generations of heirs. Or consider “forced pooling” rules in states like Oklahoma and North Dakota, which impose special remittance rules on unleased mineral owners.

Tracking these balances across entities, jurisdictions and decades is an exceptionally complex and time-consuming process. State auditors, and third-party firms paid on contingency, are increasingly targeting the energy sector.

Smart due diligence is the best defense

To avoid surprises, buyers need to include unclaimed property in their due diligence process. That means more than asking whether reports were filed. It means digging into suspense accounts, reviewing outreach practices and understanding how the target applied key rules like “pay to current.”

Key questions to ask:

• Did the target apply dormancy rules correctly?
• Were balances tied to deceased or unlocatable owners properly researched?
• Were voided checks reviewed for potential liability?
• Are there balances acquired from past deals that were never reassessed?

Buyers should also confirm how owner data was recorded. For example, did the target insert a default state name for missing addresses? If so, that could affect where property is reportable and raise red flags in an audit.

If issues are found, buyers have options: adjust the purchase price, restructure the deal, require escrows or indemnities, or delay closing until exposure is resolved.

The bottom line

The O&G industry is entering a new phase of consolidation and growth. But with M&A momentum comes greater risk of inheriting hidden liabilities — especially unclaimed property that was never properly tracked, reported or remediated.

For acquirers, the message is clear: do not let suspense balances remain suspenseful. Make UP diligence part of your standard deal playbook. A missed check today could mean a major audit tomorrow.

The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.