November 17, 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.
In recent articles, we’ve been highlighting the different ways producers in the WCSB have tackled liability obligations from looking at improvements to total liabilities in the region, to growth in reclamation work, to the role played by the Orphan Well Association. This time, we wanted to celebrate the work done by individual companies to improve their overall financial positions by highlighting the top companies in the WCSB by improved asset-to-liability ratios for the past year.
To collect this data, we took the publicly-available data compiled in AssetBook and applied the AER’s Licensee Liability Rating formula to their liability data (note: this data does not include proprietary information including administrative liability clean up, SSLAs, we have simply applied the AER’s formulas to calculate these values). From this list, we narrowed our focus to companies with asset values as calculated using the LLR formula totalling over $75 million. We compared their LLR rating as of November 2019 to their rating as of October 2020 to capture their asset-to-liability ratio improvement.
The results gave us 19 companies who have shown the greatest LLR improvement and how they achieved it, comparing their percentage change in total assets and liabilities.
Digging into the data shows that companies have deployed different strategies in strengthening their liability ratios. Some have targeted their liabilities by increasing their rates of abandonments and reclamations while others have boosted their asset values to improve their ratios.
This shows that as liabilities increase in importance both from a government assessment standpoint and as a measure of importance for banks and investors, there are multiple paths companies can pursue to improve their standing. It also shows that as undervalued assets become available in the current A&D landscape, companies can assess the risk posed by these assets in different ways depending on their asset/liability ratio.
To learn more about how third-party evaluators such as banks, brokers, and investment firms use liabilities to measure the potential impact of acquisition, download our latest case study. To learn how AssetBook can help you easily calculate the LLR for a company, a group of assets, or an individual well, visit our website or contact us for a demo.