Word to the Wise: Open Asset Evaluation for October 2020
October 6, 2020
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.
Succeeding in oil and gas M&A comes down to how quickly and how effectively 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.
For this month, XI will take a slightly different approach and examine opportunities that may fall out of the strategic combination of NAL Resources by Whitecap Resources announced on August 31, 2020.
NAL’s production and lands overlap Whitecap’s by more that 80%, but what will happen with the 20% that doesn’t overlap? Savvy buyers will be looking at these non-core assets as a potential opportunity.
Merger Fall Out Properties
An important thing to do when a merger is announced is to think about what non-core assets may fall out of the deal. Looking for NAL-owned production/land assets in the areas that don’t overlap may yield an acquisition opportunity as Whitecap looks to ensure it is consolidating its portfolio. XI’s Merger Report makes this analysis easier.
Asset Liabilities
One of the most important parts of A&D research these days is to look at the liabilities carried by the asset. Once you have parsed out the ideal fall out properties, you can run these individual assets in XI’s LLR module to see what the post transaction LLR would be for both the buyer and the seller in each province. An independent evaluation of the asset’s retirement obligations with calculations using XI’s ARO Manager is an important next step. Whether you choose to use XI’s trusted cost model or substitute with another, ARO gives you a more complete picture of end of life costs including non-operated licenses and working interest adjustments. In addition to knowing an asset’s ARO numbers, it is helpful to know the scheduling of those obligations and how they will fit into your company’s short, mid, and long-term planning.
These are just a couple quick ways to do A&D prospecting, using a real-world example showing how you can be proactive rather than waiting until assets are packaged up and available publicly. If you’d like to learn more about how XI’s AssetSuite can analyze potential acquisitions, contact XI Technologies.