How a global firm moved swiftly to set up a stand-alone energy business

When the deal closed, the buyer now owned the assets and onboarded 106 oil field employees. But the organization didn’t have a leadership team and was missing other basic processes. The buyer and seller agreed on a transition service agreement (TSA) to maintain basic services and support. However, the buyer needed to exit the TSA in a timely manner to avoid punitive monthly payments, while at the same time report to the parent company results of operations under IFRS. Notably, the seller accounted for the assets using generally accepted US accounting principles, which meant the EY team leveraged their understanding of both methodologies to verify and meet necessary accounting standards.
 

On Day 1, post-close, EY Valuation and Accounting teams assisted the newly established subsidiary with accounting for the transaction, while various EY strategy and technology teams focused on building out a roadmap to build a self-sustaining organization.
 

Without a stand-alone management team, the EY teams stepped in with its industry knowledge and an organizational roadmap that could be fine-tuned as leadership and employees came on board.
 

“The stand-up of an upstream operator, whether a subsidiary or a new business, requires experience-led blueprinting,” said Sahil Vaziralli, EY-Parthenon Senior Director, Ernst & Young LLP. “Leveraging our experience, we’re not starting with a blank sheet of paper. We’re coming in with something that gives the client a structure that’s more than halfway there. Then it’s a question of how to adapt it or make slight adjustments to really get people bought in and involved in the process.”
 

Three months post-close, the new subsidiary’s headquarters opened. Around the three-month mark, the company and the seller also held a series of organizational design workshops. The new company emerged from the workshops with detailed functional transition and stand-up plans. The team understood their goals to execute on milestones for the following functions: operations, production accounting, drilling and completions, marketing, land, finance and accounting, safety, health and environment, regulatory, subsurface, and human resources. Key steps for these functions included onboarding additional talent as well as standing up systems, technology and processes needed for success.
 

The ERP system was a top priority for the new company as it was required to exit the TSA. Further, it needed to be completed quickly. 

With the short time frame, this transition required the highest level of efficient project management and a problem-solving approach to address legal, technological and personnel issues. Among the challenges was setting up third-party application software. While the EY team could build interfaces and integrations between common applications, they couldn’t set up third-party application software until they had a subsidiary employee to establish licensing.
 

Five months after the deal announcement, the new company started to fill finance and accounting roles. EY assisted the newly appointed finance and accounting teams with Day 1 accounting considerations and engaged in meaningful conversations to inform accounting policy determinations.
 

Ultimately, another 50 general and administrative employees were brought on board. As employees received training and learned best practices, EY hybrid-agile methodology for technology implementations allowed the team to address employee feedback and transition the established company and systems over to the newly hired employees. That methodology centered around very specific due dates and deliverables that were critical to Day 1 operations and provided teams the ability to go live with portions of SAP technology while still in development and testing took place.