Oil and gas companies engaged in mergers and acquisitions should evaluate royalty suspense balances, successor liability, and unclaimed property compliance risks.
by PJ Sheets and Angie Gebert
As merger and acquisition (M&A) activity accelerates across the oil and gas industry, companies should evaluate royalty suspense balances, mineral interest obligations, historical reporting practices, and potential successor liability for unclaimed property. These liabilities often transfer to the acquiring entity and can create significant audit exposure if not identified and accounted for during due diligence.
Companies that ignore or delay review of potential unclaimed property liabilities ahead of a merger or acquisition are putting themselves at risk. Proactive review of these liabilities before closing can help reduce financial risk and avoid costly remediation after the transaction is complete.
Through the first quarter of 2026, the oil and gas industry continues to experience elevated merger and acquisition activity driven by consolidation, operational efficiencies, portfolio optimization, and evolving commodity markets. Companies are pursuing acquisitions to strengthen production capabilities, expand acreage positions, and improve scale in core basins.
While transaction teams typically focus on tax structure, operational integration, and valuation metrics, unclaimed property often receives limited attention during the diligence process. This oversight can create substantial post-close exposure, particularly when acquired entities maintain decades of royalty owner data, unresolved suspense balances, or inconsistent reporting practices.
“Unclaimed property liabilities often are inherited long before they are identified, making due diligence the most effective opportunity to uncover exposure before it becomes a post-closing issue.” – Crowe analysis
Unlike many other liabilities, unclaimed property obligations could extend back 15 years and frequently are identified only after an unclaimed property audit begins. In many transactions, acquiring companies discover potential exposure that is associated with incomplete records, which can be difficult to remediate (for example, aged suspense balances with limited detail or information).
Unclaimed property compliance in the oil and gas industry is significantly more complex than in many other sectors. Companies routinely manage royalty payments, working interest distributions, joint interest billing (JIB), overpayments, and mineral proceeds tied to large volumes of owners across multiple jurisdictions.
Royalty suspense balances remain one of the most significant risk areas. Funds can remain suspended for extended periods because of title defects, probate issues, ownership disputes, missing documentation, or unresponsive owners. Over time, these balances can become reportable unclaimed property under state escheat law.
Additionally, many states impose industry-specific requirements governing oil and gas proceeds. Numerous jurisdictions apply current-to-pay provisions, which might require companies to release and report all funds associated with an owner once any portion of that owner’s property interest reaches dormancy (typically after three or five years, depending on the state). Failure to follow the current-to-pay reporting requirements can create significant unclaimed property exposure.
Ownership complexity further compounds compliance challenges. Mineral interests frequently are divided among heirs, trusts, and multiple successors over generations, making accurate owner maintenance difficult. Incomplete address information and outdated owner records often increase the likelihood of property becoming reportable.
M&A activity can substantially expand unclaimed property exposure because liabilities typically transfer to the acquiring entity unless specifically carved out from the purchase agreement. Whether structured as a stock acquisition, a merger, or an asset acquisition, buyers ultimately may become responsible for historical noncompliance for pre-acquisition periods.
In many cases, acquired companies might never have conducted a formal unclaimed property review. Legacy entities could have incomplete filing histories, inconsistent dormancy tracking, or unresolved balances dating back many years. Acquiring companies often inherit these obligations without fully understanding the potential exposure.
The challenge becomes even greater when historical institutional knowledge disappears following integration. Employees familiar with legacy owner accounts, suspense practices, or historical reporting decisions might no longer be available after the acquisition. As a result, companies could struggle to reconstruct historical activity during an unclaimed property review or state audit.
This risk is particularly important because many states permit auditors to estimate liability when records are incomplete. Estimation methodologies can substantially increase assessments, especially when companies cannot substantiate their historical reporting positions. However, estimation and extrapolation generally do not apply to royalty suspense balances, as those balances are known and can be directly quantified.
State enforcement activity related to unclaimed property continues to expand, with oil and gas companies remaining a consistent audit target. Many states use third-party contract audit firms compensated on a contingency-fee basis, creating incentives for broad and aggressive examinations.
Mergers and acquisitions have become an increasing area of focus during state reviews. Auditors frequently examine acquired entities and inherited liabilities to determine whether unclaimed property was properly reported.
Delaware remains particularly active given its position as the state of incorporation for many companies. Delaware also has implemented a merger and acquisition-focused VDA pathway intended to address historical exposure identified during transactions. Companies that proactively pursue remediation before receiving an audit notice might benefit from a reduction in interest and penalties.
According to the National Association of Unclaimed Property Administrators (NAUPA), unclaimed property programs collectively return billions of dollars to owners each year, while states continue expanding enforcement initiatives and audit activity nationwide to collect these funds from holders.
Oil and gas companies can significantly reduce unclaimed property risk by integrating compliance into both transaction planning and ongoing operations. Effective risk management begins with documented policies and procedures that clearly define dormancy tracking, owner outreach, reporting obligations, and record retention requirements.
Enhanced diligence during mergers and acquisitions is equally important. Buyers should evaluate:
Companies also should assess data availability and quality across acquired entities. Incomplete or inaccurate owner records frequently contribute to reporting errors and potential exposure.
Periodic self-assessments and voluntary remediation efforts can help organizations address potential exposure before states initiate examinations. In some cases, VDAs can provide meaningful reductions in penalties and interest while getting into compliance.
Oil and gas companies manage complex ownership structures, royalty payments, suspense accounts, and mineral interests across multiple states. These factors create unique compliance challenges and increase the likelihood of aged or unresolved balances.
Yes. Through most stock acquisitions, historical unclaimed property obligations typically transfer to the purchasing company.
Certain states require companies to report and remit all balances associated with an owner once any portion of that owner’s property interest reaches dormancy, including amounts that have recently accrued and would not otherwise be considered dormant.
States are expanding audit programs, using third-party audit firms, and focusing more closely on mergers, acquisitions, and historical transaction activity.
As consolidation continues across the oil and gas industry, unclaimed property no longer should be treated as a secondary compliance issue. Royalty suspense balances, legacy owner records, and historical reporting gaps can create substantial financial exposure during and after transactions.
Companies that proactively incorporate unclaimed property into diligence, compliance, and integration efforts will be better positioned to reduce risk, improve reporting accuracy, and avoid costly surprises in an increasingly active enforcement environment.
About the Authors:
PJ Sheets and Angie Gebert are leaders on the Crowe LLP unclaimed property services team. They advise organizations on unclaimed property compliance, audit defense, voluntary disclosures, and transaction-related risk management. Their experience includes helping companies identify and mitigate unclaimed property exposure associated with mergers, acquisitions, and ongoing compliance obligations.
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