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Oil & gas companies are renowned for using large amounts of data in their search for treasures below the surface. So why is liability tracking from a financial perspective not receiving the same data-driven attention?
The need for “more data” is apparent whenever the federal and provincial governments announce available funding to encourage and accelerate site abandonment and reclamation work. These programs target roughly 100,000 inactive wells. Some companies who have inactive wells scramble to pull together the relevant financial information needed to receive funding, but many are unable to take advantage of funding opportunities when their data is disparate, inaccurate, or too sparse to qualify. Even if funding opportunities were able to be capitalized upon, tracking the financial impact of the available funding adds a new level of challenge for many companies.
While the practice of gathering, normalizing, and analyzing data is increasingly applied to ARO financial tracking and reporting, we regularly hear about the inability to pull together, maintain, and update the information required to calculate those liability costs.
In the past, financial experts have been frustrated by the myriad of sources for data on asset status and liabilities. Some sources are publicly available:
- Multiple LLR formats (used predominately by Operations groups)
- Petrinex (used by Production Accounting)
- the Inactive Well List (used within the Operations Team)
Others are proprietary, including:
- Land systems storing working interests
- Lists of non-operated assets (tracked partially by the land team)
- Multiple ARO cost models
Each of these data points comes in its own format, is updated for different purposes, and in different time frames. Added to the challenge is that internal information is often maintained by different departments, resulting in numerous versions. Bringing together that information effectively takes a concerted amount of cooperation and effort on the part of multiple departments within a company.
Access to data is one thing – being sure everyone from Finance to Business Development, Operations, and Environmental teams has access to reliable data to inform their part of asset management. But what about the need to feel confident that they are seeing and using the most accurate and up to date data possible for the individual needs?
That highlights the most important issue: what is the assurance that what one team uses contains all the latest information that another team may have worked with, changed, or updated? How can they feel confident that they are seeing and using the most accurate data possible for their individual needs?
A simple request can become a time sink for multiple teams. Innocent mistakes cost the company time and money. Moreover, being unable to quickly show transparency to stakeholders can have even more serious impacts down the road.
Having a single source of data that can be easily accessed, updated, or analyzed by any individual who uses the data to fill in their “piece of the puzzle” in the company workflow allows greater efficiencies across the board. Many times, pieces of data such as Directive 13 compliance, Inactive Well status, reported incidents, Site Specific Assessments, or LLR exemptions are only referenced during specific discussions directly involving those pieces of data.
By integrating all pieces of information which might affect a licensee’s liability cost or management into one single source of truth, confidence is restored, and data can be relied upon for making asset management decisions. The decisions are then made based on complete facts rather than partial information.
Above all, by including all relevant information within the single source, decisions can focus on working towards finding “the biggest bang for the buck,” easily including all factors involved.
XI’s ARO Manager solves the problem of multiple data sets converging in multiple formats. ARO Manager eases financial tracking and reporting because it centralizes all public and proprietary data into one “master” hub. The software allows different departments to input their information in a way that provides easy entry and smooth flow into reporting, with change logs that allow for total transparency and compliance.
ARO Manager is the only standardized tool that is SOC compliant, customizable, and auditor-ready for estimating and monitoring asset retirement obligations in Western Canada’s oil and gas sector.
Learn more at our upcoming webinar:
The Fundamentals of ARO Manager for Financial Tracking and Reporting
When: Thursday, September 14, 2023
Time: 9:00am MT
Where: Zoom. Register here.
To discover how XI’s ARO Manager can help you immediately with your planning and reporting of liability management, visit XI’s website or contact XI for a demo.