Word to the Wise: How to bridge the gap between ARO and LLR

January 10, 2023

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 Word to the Wise in your inbox, subscribe here

Managing asset retirement obligations (ARO) for oil and gas assets is a significant part of overall operations in the WCSB. But most organizations don’t recognize the gap that can occur between operations and finance when dealing with the ARO process. Different departments often rely on completely different sets of calculations — LLR for Operations, ARO for Finance and Accounting. Comparing the two is not an apples-to-apples situation, but they do need to be viewed together to understand the whole picture of your company’s current or future liability health.

When organizations aren’t even aware that there are gaps in the end-of-life obligation processes or when acquiring or disposing of assets, then bridging the gap between operations and finance becomes difficult, especially when you’re not able to generate a consistent internal and duplicable model.

This problem is exacerbated when an organization’s ARO process is managed by spreadsheets. Simple requests for things like pro-forma LLR scenarios can turn out to be complicated, time-consuming, and confusing when highly competent professionals work with different tools, data, and methodologies. Innocent mistakes cost the company time and money, and in today’s volatile environment, most companies can afford neither.

The job of bridging the gap between those focused on LLR and those in finance focused on internal ARO  may fall to the Business Development group, particularly when looking at acquiring or divesting of assets.

XI Technologies recently released a case study on this subject, written by a Senior VP Business Development of a mid-sized oil and gas producer. The study examines how AssetBook ARO Manager helped the BD team bring information from both the operations and finance calculations into one tool for analysis. This enabled them to optimize potential transactions. By switching from an outdated, difficult-to-manage spreadsheet to XI’s purpose-built ARO software, any potential dispositions or acquisitions were made significantly easier, faster, and more accurate.

Click here to download the case study and discover how ARO Manager became the bridge they needed to function more efficiently.

ARO Manager is the only standardized tool for estimating and monitoring asset retirement obligations in Western Canada’s oil and gas sector. To learn how XI’s ARO Manager can help with the planning and reporting of liability management, visit XI’s website or contact XI for a demo.