Selling an Oil & Gas Asset: Price Justification
By default, the buyer doesn't believe the seller's numbers — they'll either verify everything themselves, price in a risk discount, or walk away from the table. Here's what belongs in a price-justification package for an oil and gas asset in Russia: why deals fall apart during due diligence, what a buyer checks first, and how to work out a price that survives those questions instead of just satisfying the seller.
Justifying an oil and gas asset's price at sale means assembling, in advance, what a buyer would otherwise chase down with suspicion: reserves category, production history, license-condition status, and post-tax NPV. Without that package, the buyer either cuts the price for their own risk or walks away at due diligence — how roughly half of such deals end.
Why Do Deals Fall Apart Over Price?
A subsoil license can't simply be assigned like ordinary property — that's the first thing to understand before you start selling. Russia's Subsoil Law sets out a closed list of grounds on which the right to use a block can pass to another party at all, and an ordinary sale between two unrelated companies isn't on that list.
"The right to use a subsoil block, once granted to a person through the established procedure, may not be transferred to third parties — including by way of assignment under civil law — except in the cases provided for by this Law and by the Federal Law 'On Production-Sharing Agreements.'" — ConsultantPlus, Russian Subsoil Law, Art. 17.1 (in Russian)
In practice, that means most deals sell a stake in the license-holding company, not the license itself. Which means the buyer's due diligence checks the whole business, not a formal license transfer — from the geology to the corporate structure. That's exactly why the price so often falls apart not at the start of talks, but in the middle, once the buyer actually starts checking.
"Based on our practice, a significant share of deals fall apart at the buyer's due-diligence stage, because the buyer doesn't understand or doesn't trust the financial results the seller has presented. In that case, the buyer either offers a price so low the seller won't accept it, or walks away from the deal entirely." — TeDo — Presale Preparation (in Russian)
By TeDo's own estimate, roughly half of the deals that reach due diligence never make it to a signed agreement — and what decides that isn't the asset's quality, it's the quality of the numbers presented about it.
What Belongs in a Price-Justification Package?
You can't survive that kind of scrutiny unprepared. Deal advisors call this vendor due diligence, or presale preparation: the seller commissions an independent review of their own asset before the buyer ever sees it, so they control the process instead of chasing someone else's questions.
"A transparent, fact-backed track record for the business being sold is one of the key factors in a successful deal. Advance preparation lets the seller control the due-diligence process itself, and understand the substance and potential consequences of any financial, tax, and legal risks the review turns up." — TeDo — Presale Preparation (in Russian)
For an oil and gas asset, the minimum price-justification package looks like:
- Geological parameters and reserves category — with the date they were estimated
- Production history (if the block has been developed) and a profile for the remaining license term
- Status of license-condition compliance — violations cut the price regardless of reserves
- Post-tax economics — NPV, IRR across several oil and gas price scenarios
What Will the Buyer Check First?
Real deals show buyers care less about the bottom-line number than what it's built from. In spring 2026, Vitaly Yuzhilin's RusKhim decided to exit gas production entirely and sell the structures holding the licenses for the Kumzhinskoye and Korovinskoye subsoil blocks in the Nenets Autonomous Area — the buyer, according to reports, is likely to be Zarubezhneft. Kumzhinskoye is a large field by reserves — 104.5bn m³ of gas, category ABC1+C2 — Korovinskoye a medium one at 41.1bn m³, and the license for the Kumzhinsky block runs to 21 November 2032.
"…the value of SN Invest, which holds the license for the Kumzhinskoye field, has been assessed at 7.5 billion rubles; the estimate's relevance is confirmed by the upcoming sale of the company as a whole." — Neftegaz.RU — RusKhim prepares to sell its gas assets in the Nenets Area (in Russian)
That valuation became real not because someone claimed it, but because it's anchored to a specific reserves category, a specific license term, and an actual pending deal. Buyers check history too, not just the current balance: the Lugovskoye oil and gas field in the Saratov region, which the Kirillitsa group bought in May 2026, was discovered back in 1961 and produced from 1977 to 2005 — that documented production history, alongside category C1 reserves on the State Reserves Register, is what the deal was built on, even though the block hadn't produced anything for more than two decades.
How Do You Work Out a Justified Price?
For a producing or previously developed asset, the standard valuation method is the income approach: forecast the cash flow and discount it to today. That's not an alternative method — it's the industry default.
"It is widely recognized that the income approach is the primary method used to value extractive — in particular, oil-and-gas-producing — assets." — Institute for Economic Strategies — Valuing Oil-and-Gas-Producing Assets (in Russian)
The difficulty isn't the approach itself, it's the volume of input data. Building the cash flow correctly needs an annual — and, for the first three years, quarterly — forecast of production, capital spending, and operating costs across the entire development horizon. That takes geological and engineering expertise most appraisers don't have.
"…building a cash flow under the income approach requires a large volume of input data tied to the technical and economic parameters of field development, including annual — and, for the first three years, quarterly — forecasts of production volumes, capital expenditure, and operating costs across the entire forecast horizon." — Institute for Economic Strategies — Valuing Oil-and-Gas-Producing Assets (in Russian)
A full-scale calculation, built to the same standard as project design documents, is overkill for valuation purposes — but even that scaled-down version, by the same estimate, takes anywhere from six months to several years and costs running into the millions of rubles. Errors in these calculations, per the same source, can be comparable to the asset's own value and run into the billions of dollars — because no single valuation methodology for oil and gas assets, recognized by both the state and the industry, exists yet.
How Does AVP AI Build the Price-Justification Package?
AVP AI — an AI platform for oil and gas asset evaluation — builds the same package a geologist, a development engineer, and a financial consultant would otherwise spend months on, in minutes instead of half a year.
Given coordinates or a license number, the platform pulls the block's geology from open industry data, estimates reserves by analogy across a probabilistic P90/P50/P10 range, builds a production profile that accounts for history and the remaining license term, and runs surface facilities and economics — NPV, IRR, after tax — across several oil and gas price scenarios. The output is a report with a defensible value range and numbers built to survive the buyer's questions, not just satisfy the seller.
Want to see exactly what a buyer will check first? Run the same calculation as oil and gas asset due diligence — it's the same pipeline, just from the other side of the table. Or see how the same methodology looks from a buyer's side in buying an oil field.
Frequently Asked Questions on Selling an Oil & Gas Asset
Generally, no. Russia's Subsoil Law allows the right to use a block to transfer only in a closed list of cases — reorganizing the subsoil user, buying a bankrupt owner's property, a transfer between a parent and its subsidiary. An ordinary sale of the license between unrelated companies isn't on that list, so in practice sellers sell a stake — or all — of the equity in the license-holding company.
Before due diligence, the buyer works off the seller's numbers; afterward, off what they found themselves. If the findings don't match the deck or raise questions, and there's no ready justification on hand, the buyer either demands a discount for their own risk or walks away — which, by deal advisors' own account, is how roughly half of deals that reach due diligence end.
Anywhere from six months to several years, and costs running into the millions of rubles, if you run a full income-approach valuation with a production, capex, and opex forecast across the entire development horizon. For most deals, that level of detail is overkill: AVP AI runs a comparable calculation in minutes from coordinates or a license number.
Given coordinates or a license number, the platform estimates reserves by analogy (P90/P50/P10), a production profile that accounts for history and the remaining license term, surface facilities, and post-tax economics — NPV, IRR. The result is a package of numbers built to survive due-diligence questions, not just satisfy the seller.
Sources
- Legal document ConsultantPlus ↗ Russian Subsoil Law, Article 17.1: Transfer of the right to use subsoil blocks (in Russian)
- Industry media Neftegaz.RU ↗ Methanol on the Move: RusKhim Prepares to Sell Its Gas Assets in the Nenets Area and Relocate Its Methanol Project to the Baltic (in Russian)
- Industry media Neftegaz.RU ↗ Oil Resurs Dobycha Acquires the Mature Lugovskoye Oil and Gas Field (in Russian)
- Analysis & consulting TeDo ↗ Presale Preparation (in Russian)
- Analysis & consulting Institute for Economic Strategies ↗ Valuing Oil-and-Gas-Producing Assets: Relevance, Features, Problems and Tasks (in Russian)
We will build the price justification for your asset — free of charge
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