Regardless of the benefits the oil and gas industry provides to everyone across Canada, the industry will always face criticism. 2016 has been one of the most challenging years for operators with record low oil and natural gas prices. Western Canada Select dropped below $14/bbl in January 2016 and AECO spot pricing was under $0.50/mcf in May 2016. Although the majority of companies posted multimillion dollar losses, they proved to reduce their liabilities.
Below is a plot of the monthly total deemed liabilities posted by the AER.
In July 2016, the AER removed approximately 4 billion of liabilities on facilities licensed as sweet multiwell batteries. If we exclude this month as a data point, the industry as a whole removed nearly $2 billion of deemed liabilities. This reduction is a combination of companies abandoning wells/facilities and also focusing on removing unnecessary deemed liabilities. This $2 billion in reductions is also above and beyond the new liabilities from the newly issued wellbore and facility licenses. Even in some of the darkest financial times for oil and gas producers, the industry as whole made major strides in reducing deemed liabilities (even if these LLR dollars aren’t real).
Above all, this is a clear example of how liabilities are not accurately represented in the LLR system and further proof as to why companies should focus more on accurate asset retirement obligation evaluations.
Lighthouse Liability Solutions Inc. is a team of professionals who accurately evaluate liabilities and assist companies in reducing their LLR. We assist companies in all aspects of the regulatory system and are capable of cheaply reducing liabilities for companies seeking assistance. We are in the process of removing millions of dollars in unnecessary liabilities and assisting companies looking to divest/acquire assets.
Commodities prices obtained using BOE Report Finance
Patrick Gratton, P.Eng
587-999-0339
lighthouseliabilitysolutions.com
gratton@lighthouseliabilitysolutions.com