Word to the Wise: Open Asset Evaluation for August 2020

August 4, 2020

Succeeding in oil and gas M&A 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 sale of Bow River Energy Ltd. On March 24, 2020, Sayer Energy Advisors was engaged to assist with the marketing and consummating a transaction with respect to all of the assets of Bow River Energy Ltd. BDO Canada Ltd has been appointed by the Court as a Monitor as Bow River has obtained an initial order under the Companies’ Creditors Arrangement Act.

Certain assets in Fleeing Horse and Black Creek have already been transacted to 2270943 Alberta Ltd but the rest of Bow River’s assets are now for sale.

Potential Buyers

An important thing to do when evaluating an 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. XI allows you to do this for a smaller area than a full company, should you be interested in only a subset of the assets. Bow River has a high working interest in this area, but does still have some partners to look into:

Click here to download a synergy spreadsheet report for Location 01-37-1W4 to 31-44-10W4

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. Contact XI to see this report.

Asset Liabilities

One of the most important parts of A&D research these days is to look at the liabilities carried by the asset. Using the Alberta Government’s LLR algorithm, XI calculates the LLR on this Area for this Company to be .081. Click here to download our LLR spreadsheet for this area. It is important to note that using the AssetBook you could carve out different areas that have a different financial impact.

But it’s also best practice to do an independent evaluation of the asset’s retirement obligations with calculations you trust. XI’s ARO Manager makes this not only possible, but it’s quick and easy to do so. 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:

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.