Wednesday May 1, 2019
Given the results of the Orphan Well Association v Grant Thornton Ltd. (commonly known as the “Redwater” case), operators and lenders are looking for ways to reduce their exposure to environmental liabilities. Traditionally, this has been accomplished by divestitures or asset retirement (abandonment and reclamation) programs. Whatever the form, the goal remains the same: get licences out the door. With the spotlight on liabilities from regulators and financiers, divestitures are not as executable as they were in the past.
Thorough planning of future abandonment and reclamation (“A&R”) programs is needed for the long-term sustainability of any company. Edge Liability Risk Management (“Edge”) offers a solution to getting more standing wellbores and associated licences “out the door”. We are able to provide a Capacity Increase Tool while maintaining budget control and cost certainty to your bottom line.
Capacity Increase and Budget Control
Edge has developed a business model that can help clients shed environmental liability and provide cost certainty to their A&R programs. The Edge model allows operators to transfer their liabilities to Edge for the cost of abandonment and reclamation. This allows operators to utilize Edge as an asset retirement branch of the company. Operators work alongside Edge to determine the size of the A&R program, and Edge provides the cost for taking on those licences. The operator is able to get those licences and the associated liability off of the books instantly and Edge takes a set price to take ownership of the wells. Clients are now able to accurately budget their asset retirement obligations without the risk of cost overruns, while keeping staff focused on the core business of producing oil and gas. Given cost certainty and the ability to execute an entire A&R program overnight, the Edge model acts as a Capacity Increase Tool for clients to continue to reduce their exposure to environmental liabilities.
Partnering with Edge to increase the amount of A&R work your company can do achieves a number of desirable outcomes:
- Cost Certainty and Budget Control: mitigate risks of operational cost overruns by transferring to Edge for a set price.
- Desirable Investment Opportunity: When competing for capital, your company will emerge as a desirable opportunity as the company will contain minimal environmental liabilities and have innovative alternatives to realize higher rates of return on divestments.
- Demonstrate Social Responsibility: demonstrates the social responsibility of cleaning up inactive oil and gas sites.
To learn more about how Edge can act as a Capacity Increase Tool for your A&R programs, please see our website www.edgelrm.com and contact us today.
Greg A. Sawchenko
VP Business Development
Edge Liability Risk Management
ABOUT EDGE LIABILITY RISK MANAGEMENT:
Edge Liability Risk Management (“Edge”) is a firm that specializes in the management of oil and gas environmental liabilities, with a focus on risk assessment. Edge’s industry leading solutions allow operators to realize higher sale multiples on properties and unlock deals for properties that were once seen as unsellable. Our goal is to help operators turn their liabilities into opportunities.