Word to the Wise: What to do without the AER’s LMR report

February 25, 2020

What do you do now that the AER is no longer providing an LMR summary report?

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 the past few months, XI Technologies has been tracking the status of the AER’s monthly detailed liability management rating (LMR) reports. The summary report with individual company LMR ratings abruptly disappeared in December and has not been issued since.

This has left those who relied on the report to evaluate over the fence acquisitions or borrowing decisions scrambling to find a solution. How do you evaluate the financial health of another company or asset when the data you were relying on is no longer available?

The Hard Way

Without LMR numbers to give a quick assessment for prospecting, companies will now need to first manually search for a company’s assets. With the right searches, they can pull the licenses of the assets they’re evaluating. Pulling this information together requires accessing multiple platforms to get the well details, surrounding groundwater depths, problems reported, current and historical monthly production, as well as including these details for any subsidiary companies that the company might have purchased which still have live operator codes.

They then need to do an asset evaluation on the properties they pulled, using the monthly historical production numbers and the factors detailed in the regulations. After completing that asset evaluation, they then do a liability assessment using a rough estimation using the well location, details, groundwater depths, and problems.

Using this process, you’ll have a very rough estimate of the potential liabilities of your target. The level of confidence you have in this estimate will depend on your level of confidence in the average number you apply to the liabilities.

An Alternate Solution

XI Technologies offers solutions for those looking to assess liabilities of licenses they do not operate with its AssetSuite platform of applications. AssetBook LLR is the most reliable and recognized way to easily calculate and analyze the LLR for a company, a group of assets, or an individual well or facility. With XI’s LLR module, users can easily generate reports similar to those previously provided by the AER and use the tools within the application to do a variety of assessments on potential liabilities.

Figure 1 – XI Technologies’ LLR module

In addition to the LLR module, AssetSuite also features ARO Manager, which helps companies evaluate, track, manage, and report on asset retirement obligations. ARO Manager can provide more robust assessments of liabilities of both current and potential assets, closing the gaps identified by the AER in the LMR program. Users of ARO Manager have access to a report that lists a company’s LLR and ARO side-by-side.

Figure 2 – XI Technologies’ ARO Company Report, available to users of ARO Manager.

To better illustrate the change to the LMR report by the AER, alongside the solutions XI Technologies provides for this gap, XI has put together the following video:

For more information on this change to liability data delivery, or to discover how AssetSuite can help you manage your liability analysis, contact XI Sales.