Oil and Gas Case Studies at Eide Bailly

Situation
A publicly-traded oil and gas company approached Eide Bailly with a problem. Its main business was drilling but the company also owned producing properties and wanted to divest itself of these properties to concentrate on drilling. Coincidentally, a key employee and stockholder of the company was planning to leave to start his own oil and gas business. The company was required to buy-out the employee's stock, which would have required a significant amount of the company's available cash and would have necessitated borrowing funds. The employee would have a significant capital gains tax liability.

Solution
Eide Bailly proactively addressed each issue and worked with both parties to deliver a tailored solution. The company was able to divest its producing properties tax-free and was not required to use its cash or borrow additional funds. The employee was able to acquire an operating business with pre-tax dollars.

Results
- Restructured the deal as a tax-free divisive D re-organization that benefited both parties.
- Formed a second corporation as a subsidiary and transferred the producing properties into this new entity.
- Created a win-win situation for both parties with a stock-for-stock exchange.