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Typically, when a company sells off an asset, the license will change ownership or title to the new company that’s purchased it. But there are certain circumstances when this doesn’t happen, and the license stays connected to the seller. This can have an impact on that company’s LLR and ARO analysis, as obligations they believed were off their books are still technically tied to them.
How does this happen? Simple administrative errors like improperly filed paperwork by the buyer or the government can prevent a company from fully getting an asset off their government records. It’s not a problem that occurs frequently but isn’t terribly infrequent either. If a company notices that this has happened to them while looking over their LLR reports or other records tracking their assets, it’s a problem that can be solved by contacting the government and getting the records updated. The problem is that without a system of tracking all your assets and how they’re classified by the government, it can be incredibly difficult to know that an asset you thought you have divested from is still being assigned to you.
XI Technologies provides an easy way for producers to track every license currently attributed to them in Western Canada. AssetBook is the fastest, easiest way to analyze all the well, land, facilities, and pipeline assets of any company in the WCSB, offering the easiest, most complete source of working interest production, financials, and much more. You can get a quick analysis of all your liabilities and obligations within AssetBook by using the ARO Manager application, which lists all of your assets and the liabilities associated with them.
XI’s Senior Sales Executive Chris Hamilton describes a circumstance where he revealed assets to a prospect within ARO Manager, “I was at a company a while back to demo AssetBook and ARO Manager. The company primarily operated in British Columbia, with some assets in Alberta. The ARO Manager analysis revealed nearly $140,000 in liabilities in Saskatchewan facilities, which was news to them as they insisted they did not own any Saskatchewan assets”.
“The company was still on record with the government for having a 50% ownership of five Saskatchewan facilities that they had sold off years prior”, continues Hamilton. “Even worse than the $140K they were currently listed as liable for, if the operating company that shared the working interest were to get into trouble, this company would have been deemed liable for nearly $280,000 in ARO for assets they had previously sold”.
To see how easy it was to spot unknown assets in ARO Manager, watch this video.
If you’d like to see how easy it would be to generate this report for your company, contact XI and we’d be happy to show you.
Best Practices in ARO Management Panel Discussion
On Thursday, November 14, XI Technologies is hosting a panel discussion on best practices in ARO management in the WCSB. XI has assembled an expert panel to present their views on the current state of ARO and liability management, how they see industry addressing ARO challenges, what is working, what isn’t, and what best practices are evolving. If you’d like to attend, contact us to request your invitation.