Word to the Wise: Open Asset Evaluation for January 2020

January 21, 2020

Succeeding in oil and gas development comes down to how well and how quickly you can analyze potential opportunities. Once a month, XI Technologies will apply its evaluation tools to a currently available asset to give readers a sense of the opportunities available and how they can be evaluated for A&D purposes.

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

For this month, XI will examine the bankruptcy sale of OAN Resources Ltd. On October 13, 2019, Hardie & Kelly Inc. was appointed as the Trustee of the bankrupt estate of OAN Resources Ltd. Hardie & Kelly then engaged Sayer Energy Advisors to assist it with a sale for cash of OAN’s oil and natural gas property. The company’s only asset is its Keg River oil play in the Panny field of northern Alberta, which is what we will analyze in this post.

Potential Buyers

An important thing to do when evaluating a potential acquisition is to look at who the most likely bidders for the asset would be. The first thing to check for is whether the properties have any working interest partners who might be looking to increase their share of the asset by running a Synergy Report. In this specific instance, the asset had no synergy partners, and thus the report provides no information.

The next best thing to do for this information is to look at what other companies are operating in the area, as they may be looking to increase their imprint in the area to benefit from economies of scale. Here’s a report for this asset:

Click here to download a full spreadsheet version of this report.

Asset Liabilities

One of the most important parts of A&D research is to look at the liabilities carried by the asset. The listing has the assets at an LMR of 3.65 with a net deemed asset value of $1,904,809 (deemed assets of $2,624,767 and deemed liabilities of $719,958). But it’s good to do an independent evaluation of its ARO when possible with calculations you trust.

Here is XI’s unaudited ARO analysis of the asset. Please note this relies on XI’s cost model and working interest assumptions. As a purchaser, you may have economies of scale or be able to provide further discounts to address your ARO obligations. Click here to download a full spreadsheet version of this report.

In addition to knowing an asset’s ARO numbers, it’s helpful to know the scheduling of those obligations and how they will fit into your company’s short, mid, and long-term planning. Here’s the liability scheduling of these assets:

Click here to download a full spreadsheet version of this report.

These are just a few quick ways to do A&D prospecting, using a real-world example that is currently available for purchase. If you’d like to learn more about how XI’s AssetSuite can analyze potential acquisitions, contact XI Technologies.