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XI Technologies: Three Common issues in ARO Management


Each week, XI Technologies scans its unique combination of enhanced industry data to provide trends and insights that have value for professionals doing business in the WCSB. If you’d like to receive our Wednesday Word to the Wise in your inbox, subscribe here

As the importance of liability management has grown, the need for data on Asset Retirement Obligations (ARO) has spread throughout oil and gas operations. What once was mostly the focus of abandonment and reclamation teams now touches on several parts of an E&P company, with cross-departmental collaboration becoming a necessary workflow for those looking to optimize their liability management programs.

As companies grow their liability management programs, particularly at a time when drilling programs and A&D work are stagnant, many are finding issues with their existing processes. Processes that served them well when ARO was a small part of their operations don’t scale as well to the new demands of increased focus and evolving regulatory frameworks.

At XI, we routinely encounter these issues with new clients looking to upgrade their ARO process. These issues tend to center around three main themes:

1.      Inaccuracy

A standard way of putting ARO information together is to pull information from a land or financial system and enter it in a spreadsheet, using different cost models and formulas as required. The issue is that these spreadsheets rely on manual data entry, which can open a company up to a whole host of errors. Mistyped data, missing information, broken formulas, or bloated, difficult-to-maintain spreadsheets are common issues with manual reporting. Even companies who avoid these issues by having an Excel wizard on their staff can quickly find themselves in trouble should that specialist exit the company or take an extended leave.

Click here to read our case study on how one company overcame inaccuracies in ARO management.

2.      Time consuming

Using traditional methods of evaluation can take too long for regular, integrated decision-making. Analyzing each well, one-by-one, is a painstaking way to get to the final stage of decision-making and often keeps companies stuck in “paralysis by analysis”. The issue is that these decisions have become mission-critical at a time when companies are operating leaner, creating a need for efficiencies in the evaluation process.

For many companies, the process of managing ARO with spreadsheets is labour intensive and can take weeks to complete, including identifying and updating with new assets or statuses, compilation of year end, compilation of abandonment & reclamation values, reports, and evaluations. Due to the amount of labour this requires, ARO management is frequently limited to quarterly or annual reporting, making it difficult to quickly assess opportunities and react accordingly. Employees who can be better utilized in other areas spend over a month doing what could be accomplished in a fraction of the time.

Click here to read our case study on how one company reduced time delays in ARO management.

3.      Multiple databases

Spreadsheets that used to manage abandonment data when it was the concern of one department once a year become bloated and unusable as they morph into ongoing processes involving multiple departments. The type of data required by one part of an organization might not be the same type as another, forcing each to create their own databases to get the information they need, the way they need it.

But with data in more places comes the possibility of more risk with data entry and currency errors. Can you communicate your issues throughout the company if you’re not all discussing the same data? Do you know which data is the most up to date? How can you work together on ARO solutions if you’re not all working from the same page? Working from disparate databases as a process continues to grow is an invitation for confusion within an organization.

Click here to read our case study on how one company solved confusion from disparate databases.

These are three of the biggest issues we see affecting companies looking to expand their liability management programs and integrate ARO data into their day-to-day decision-making. The question to ask yourself is if you recognize your own company’s processes in some of these issues. If so, you might not be managing your asset retirement program as efficiently as possible.

Want to learn how XI Technologies can help overcome these issues? Contact us today to get a demo of ARO Manager, the only standardized, web-based tool for estimating and monitoring ARO in Western Canada’s oil and gas sector.

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