AssetBook’s Liability Analysis (LLR)

AssetBook has a Liability Analysis (LLR) module to quickly evaluate groups of assets for both buying and selling. Ideal for operators and financial institutions, this report provides valuable insight into how a potential transaction could affect the AER’s Licensee Liability Rating (LLR) of companies involved. Results can quickly determine whether a deal is worth pursuing.
 
  • Determine LLR down to an individual well and facility level

  • Determine LLR down to an individual well level
  • Adjust the industry netback as needed to forecast
  • Run sensitivity analysis on assumptions to determine risk mitigation
  • Identify opportunities for bond rebates
  • Use LLR effect as a negotiating tactic

Why LLR?

Determining the LLR of an asset transaction prior to the dataroom has been time consuming and difficult until now. The Liability Analysis (LLR) module calculates detailed LLR, right down to an individual well and facilities level.
 
 
Government-supplied data is amalgamated by XI to provide a quick estimation of the deal. Customization of parameters like groundwater, ventflow and industry netbacks can be used for sensitivity analysis. Knowing your potential risks and opportunities early will allow you to structure a successful deal.
 

The Liability Analysis (LLR) module offers data for three provinces in the Western Canadian Sedimentary Basin: Alberta, British Columbia and Saskatchewan.

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Appreciated the information and ideas brought up in the discussion about the new LLR module. XI has a very powerful tool and the staff has always been supportive of getting answers to questions in a timely basis. The LLR and LMR are critical elements that need to be understood in detail when considering any acquisition of Assets. Your tools help us quickly determine whether an asset is worth pursuing at an early stage of the process. Keep up the good work.
Nels Carlson, Manager A&D, NGPR, City of Medicine Hat

Learn More About LLR

(This section references Alberta specifically. AssetBook currently has data for Alberta, British Columbia and Saskatchewan.)  

The LLR (Licensee Liability Rating) program applies to all upstream oil and gas wells, facilities and pipelines. Updated by the Alberta Energy Regulator (AER) in 2013, it’s intended to prevent Alberta taxpayers from being on the hook for the costs associated with suspended and abandoned wells, facilities or pipelines, or for remediation and reclamation liabilities.

The LLR is a ratio of the licensee’s (usually an Operator) deemed assets value to its deemed liabilities. The Licensee is required to maintain a monthly ratio of 1.0 or greater. If they do not, a security payment is required to be deposited with AER.

If a Licensee or working interest partner defaults on its obligations, the AER-funded Orphan Well Association relies on these payments/levies to manage and pay for the abandonment and reclamation efforts on behalf of the industry.

Why is Understanding LLR Important?

Understanding the liability of your assets is critical. Licensees must maintain a monthly LLR ratio of 1.0 or greater. If not, the AER requires a security payment. Non-compliance can warrant additional fees, or suspension of operations. Other considerations:

  • The Licensee assumes 100% of the LLR fees, although many are now asking their partners to contribute. In the case that a Licensee goes bankrupt, the AER will pursue the working interest partners, so knowing your risk up-front is important.
  • LLR is becoming a significant factor in A&D. The AER is entitled to block transfers if the LLR value is below 1.0. Paying an unexpected security deposit to the AER can put a company into a cash-strapped position.
  • LLR can fluctuate over time. In challenging economic conditions, some companies opt to shut in production or shift their A&D strategy, which affects the asset value.

 

Appreciated the information and ideas brought up in the discussion about the new LLR module. XI has a very powerful tool and the staff has always been supportive of getting answers to questions in a timely basis. The LLR and LMR are critical elements that need to be understood in detail when considering any acquisition of Assets. Your tools help us quickly determine whether an asset is worth pursuing at an early stage of the process. Keep up the good work.
Nels Carlson, Manager A&D, NGPR, City of Medicine Hat

What’s the Opportunity?

When considering A&D opportunities, companies with high LLR assets are in a stronger position to negotiate deals or farm-in agreements.

Some companies will be forced to divest low LMR assets to improve their overall LLR, giving companies with capital an advantage when picking up new assets. High LLR assets will become even more attractive in the marketplace.

Financial institutions, who had previously limited access to LLR information, now have the ability to run their own Liability Analysis reports.

Interested in LLR?

Learn More About Directive 006
For more information on the
Licensee Liability Rating (LLR) Program
from the Alberta Energy Regulator (AER)

CLICK HERE