XI Technologies whitepaper cautions against using LLR to estimate ARO

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XI Technologies whitepaper cautions against using LLR to estimate ARO

XI Technologies Inc. has published a whitepaper outlining 5 key reasons why Alberta Energy Regulator’s (AER’s) Licensee Liability Rating (LLR) should not be used to estimate long-range Asset Retirement Obligation (ARO) for Alberta operating and non-operating oil and gas companies. Initially created in the early 2000s, LLR was never designed to be used for estimating ARO. Doing so could lead companies to overlook millions in potential end-of-life liabilities associated with abandonment and reclamation of their wells and facilities. The potentially enormous impact of LLR shortcomings became evident when XI’s team began developing an online tool to assist E&P companies with the process of estimating LLR.

The whitepaper, entitled “LLR vs ARO: 5 reasons not to use LLR in estimating Asset Retirement Obligation”, is available for download on XI Technologies’ website at: www.xitechnologies.com/aro-cost-model.

“Since 2013, when the AER increased the deemed liability values in Directive 011, LLR really moved to the forefront. The LLR formula has become the most commonly accepted measure of a company’s long-range ARO,” explained XI’s VP of Business Development Jennifer Baerg. “We initially developed our LLR modelling tool to assist clients in evaluating potential acquisitions and estimating post-transaction LLR values to comply with AER regulations. But, as our team developed a deeper understanding of the LLR and its original intent, we became aware of several shortcomings of the LLR model that could leave unsuspecting oil and gas companies holding significantly more end-of-life liabilities than they bargained for.”

As a result, XI Technologies also developed an ARO Cost Model within AssetBook, the company’s industry-leading corporate asset research and scoping tool.

“The ARO Cost Model in AssetBook makes it possible for companies to get a more realistic estimate of the end-of-life costs associated with each well,” continued Ms. Baerg, “thereby painting a more complete picture during business development planning and A&D scoping processes. It allows companies to get a more reliable early estimate of ARO so they can factor that into their deals and decision making. The model can also be useful as a starting point for longer-range risk management and corporate financial planning.”

About XI Technologies
XI Technologies helps clients effectively interpret data to make the best decisions possible. XI provides essential software tools for A&D research, well planning and drilling research, and regulatory compliance programs in Western Canada.


For more info, contact:
Jennifer Baerg, VP Business Development
E: jenniferb@xitechnologies.com 
P:  403-517-0112