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Stalled License Transfer? Edge Liability Risk Management Can Help


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Stalled licence transfer? Edge Liability Risk Management (“Edge”) has developed an innovative Liability Transfer Model to complete deals that were previously rejected due to environmental liability or Licensee Liability Rating and Liability Management Rating (“LLR/LMR”) concerns. An exploration & production (“E&P”) company can transfer inactive wells or infrastructure to Edge to instantly remove the inactive wells from any licence transfer. Edge’s Liability Transfer Model is supported by two of the largest insurance and risk management companies in the world.

Since Redwater, obtaining approvals for non-routine licence transfers has become more difficult. Transferees want assurance that deals are not going to be rejected because of licence transfer issues surrounding inactive wellbores. The Liability Transfer Model helps to streamline the licence transfer process by removing those wellbores from the transfer, subsequently mitigating the risk to the regulator. The model greatly alleviates the environmental liability risk associated with a licence transfer for both the transferee and the regulator in the following ways:

Edge is facilitating, encouraging, and accelerating the number of abandonments and reclamations done in western Canada

At its core, the Edge model unlocks the capital to fund abandonment and reclamation (“A&R”) work, resulting in more A&R being done on an annual basis. The wells transferred to Edge will be abandoned as quickly and safely as possible. This is directly aligned with the interests of both the industry and regulatory bodies.

The Edge Liability Transfer Model puts properties in the hands of strong operators; both liabilities (operated by Edge) and assets (operated by buyer)

Backed by an exclusive insurance product designed in partnership with leading global energy insurance experts, Edge is the best candidate to handle these liabilities. Operators who want to take on properties without the liabilities can now do so. This gives industry the ability to acquire high LLR/LMR rated properties to enhance production or drill new wells without being bogged down by inactive well Asset Retirement Obligations (“ARO”).

Reduces the likelihood of bankruptcies and wells ending up in the Orphan Well Association (“OWA”)

Junior E&Ps with large inventories of inactive may not have the ability to address ARO during a depressed commodity cycle. This results in large volumes of wells being dumped on the OWA. We recently saw Trident Exploration walk away from 4,700 wells. Edge is committed to abandoning and reclaiming these wells in a timely fashion and is fully funded to do so.

Summary

The interests of Edge, industry stakeholders and the regulatory bodies are fully aligned – to efficiently and safely abandon and reclaim as many inactive wellsites as possible.  Mitigating the risk to Edge is mitigating the risk to all stakeholders:

  • Edge has an extensive due diligence program for risk assessment and pricing of A&R work
  • Comprehensive database of cost and risk information
  • Fully funded to complete A&R work
  • Self-imposed timelines: abandonments done as quickly and safely as possible
  • Exclusive insurance product

Using Edge’s innovative Liability Transfer Model, we can work together to solve the environmental liability problem currently facing the energy industry by increasing company values while cleaning up ARO resulting in a positive outcome for all stakeholders.

To learn more about how Edge can help reduce the risk associated with non-routine licence transfers and inactive wellbores, please see our website www.edgelrm.com and contact us today.

Greg A. Sawchenko
VP Business Development
Edge Liability Risk Management

Contact:
greg.sawchenko@edgelrm.com
(587) 438-6410
www.edgelrm.com                                                      

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.



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