How much does technical due diligence cost, and what drives the price?

The data room opens next week, the bid date is fixed, and someone on the deal team needs a figure for technical due diligence cost. The honest answer to "how much?" is that it depends on the scope, and any figure given before a supplier has seen the asset list, data room index and deal timetable is a guess. The good news: a short list of factors drives the price, and most of them are decisions you make. For what the review should tell you, see our note on technical due diligence before you sign.

What drives technical due diligence cost?

When two quotes for the same asset are far apart, the gap usually comes from one of these:

• How many disciplines are in scope. Reserves and subsurface, wells, facilities and subsea, decommissioning, operations, regulatory position. A review of the reservoir alone is a different job from one that runs from the rock to the last pipeline.
• How many wells and assets. One field with a handful of wells is not a portfolio across several licences or countries, and every well has a file to read, even those suspended long ago.
• How big and how good the data room is. A well-organised room with raw data (well logs, test results, production by well) is quicker to review than scanned paper, bare summaries or gaps chased through the seller's question process. Poor data also limits what any reviewer can honestly conclude.
• How long until the bid. A compressed timetable means more people working in parallel and less room to follow up on answers.
• Whether someone visits the asset. A site visit adds travel, access arrangements and days on the calendar, more so offshore. It earns its cost when equipment condition drives value, less so when the value sits in the reservoir.
• How deep the analysis goes. Checking that the seller's numbers are reasonable is one job. Rebuilding them independently is a much bigger one. Depth is where the price moves most.
• Who will rely on the report. A memo for your deal team is lighter work than a formal report for your investment committee, and both are lighter than a report a lender or co-investor will rely on. That last kind, often called an independent engineer's report, needs a documented method, formal review and wording that stands up to third parties, and it costs more for that reason.

How do you scope the review so you only pay for what matters?

Start from the decision, not a list of disciplines. A technical review is worth paying for when it can change the price, the contract terms, or whether you bid at all. So the first question is which few numbers your valuation rests on. Put depth there, and a lighter reasonableness check everywhere else.

On a mature producing field, the value and the liability usually sit in the remaining reserves, the condition of the wells and the cost of leaving. That is where an independent geosciences evaluation of the reserves and a well-by-well decommissioning cost estimate earn their cost. On an undeveloped discovery, the weight shifts to the subsurface and to whether the development cost and schedule are credible. For a geothermal asset, the key number may be the flow the wells can sustain; for a CO2 storage site, how well the seal above the storage rock is understood.

Then phase the work, so you never pay for a full review of an asset you drop after the first round:

1. Before the non-binding offer: a short red-flag review of the data room, aimed at deal-breakers and the numbers the price rests on.
2. At the go or no-go point: decide whether you are still in, and which findings need more depth.
3. Before the binding offer: detailed work only on the items that can move the price or the terms, with a site visit if condition matters.
4. Before closing: confirm anything the seller promised to provide or fix.

What should you send suppliers before asking for a quote?

A supplier can only price what it can see. A vague request gets a padded quote, because every unknown becomes contingency. Send everyone on your shortlist the same package, as a formal RFP or a short email. It is also the first draft of your technical due diligence scope of work:

• The asset list: fields and licences, onshore or offshore, and the number of wells by status (producing, shut in, suspended, permanently sealed).
• The data room index, with a note on what is raw data and what is summary.
• The deal timetable: data room access, non-binding and binding offer dates.
• The disciplines you want covered, and those already handled by your team or other advisers, so you do not pay twice.
• Whether a site visit is expected, and whether the seller will allow one.
• Who will rely on the report, and the form you need: findings as they emerge, a final report, a briefing for your investment committee.

How do you compare quotes for technical due diligence services?

A cheaper quote is often just a narrower one, so compare scope before price. When you compare providers of technical due diligence services, ask each one:

• What is excluded, and does the exclusion fall where your risk sits?
• What does the price assume about the data room, and what happens if it is bigger or worse?
• Is the depth the same? "Review of the seller's estimate" and "independent estimate" are different products at different prices.
• Who will do the work, by name, and is the person who scoped it the one who leads it?
• Have they worked for the seller on this asset, or for another bidder in the same process?
• Who may rely on the report under their terms, can a lender or co-investor be added later, and on what conditions and liability limit?

A fixed fee gives certainty only when the scope and the data room are well defined; a time-based fee is more flexible, but needs a cap and regular progress reporting. Either way, agree in writing what triggers a change and how it is priced.

What are the warning signs in a technical due diligence proposal?

• A firm price given before the supplier has seen the data room index or the asset list.
• No named lead, or a senior name on the proposal and no commitment that the same person does the work.
• Exclusions written in general terms, or none at all.
• The same boilerplate scope for every discipline, whatever the asset.
• Firm conclusions promised before the data room has been read, or certainty the data cannot support.

What does it cost to skip it?

The liabilities a review looks for cannot be sized until someone looks: a decommissioning bill larger or earlier than priced, wells that need repair before they can produce or be sealed, a production forecast that does not hold up, deferred maintenance that lands in your first year. Before signing, each of these can still change the price or the terms. After closing, you carry them, with only the recourse the contract gives you.

You can size the cost of a review before you sign. The cost of skipping it shows up after.

Cutting scope to save fees makes sense on low-value areas and is a false economy where the liability sits. That is why the scoping step matters more than the quote. Our cases page includes one engagement of this kind, "Mature-field acquisition, de-risked".

If a data room is about to open and you need a scope and a budget line, send us the asset list and the bid timetable. Every enquiry gets a reply within 24 hours, which matters when the bid date is already fixed.