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.
As more attention is given to the energy industry in Canada from increasingly vocal environmental groups, stakeholders, and investors, there is an increased focus on Environment, Social, and Governance (ESG) performance. ESG metrics have now become leading indicators for investment, providing a framework for assessing risks and generating sustainable risk-adjusted returns. With some high-profile cases of prominent funds dropping Canadian energy giants over ESG concerns, it’s imperative for our industry to provide evidence that Canadian companies are delivering on ESG commitments.
Among the ESG risk factors most commonly considered when evaluating a company’s performance, people usually think of the higher-profile public issues such as environmental pollution, climate change, and stakeholder relations (especially when exacerbated by protests). However, there is a growing awareness of historical liability and clean-up costs which have direct implications for investor confidence and economic integrity of any company.
Liabilities associated with the retirement of assets in the WCSB are now a major focus of the provincial and federal governments. Awareness of one’s potential liability is critical for managing and proving performance; you can’t manage what you can’t measure.
Following landmark court decisions like the Redwater case, the importance of Asset Retirement Obligations (ARO) within the industry and among investors became top of mind. Energy producers can only expect the intensity of that spotlight to increase in a post-COVID-19 world. The government response to the pandemic-induced struggles of the industry was to focus on abandonment and liabilities, providing a framework to inject funds into the industry, preserve jobs, tackle environmental concerns, and reduce the amount of potential liabilities introduced into the Orphan Well funds (and equivalents) of Western Provinces.
This decision has raised concerns with some advocacy groups that taxpayers were bailing out the obligations of the oil and gas industry. It is perceived that our industry is quick to profit from the exploitation of natural resources, but slow to make good on its environmental and social responsibilities.
Of course, the truth is far more complex. The exploration of oil and gas has long benefited many in Canada and now that we are facing an unprecedented and unpredictable event causing an artificial lack of demand, even the most responsible producer is tested in their ability to meet short-term obligations. But producers will need to work harder than ever post-recovery, to prove to ESG-minded investors that they are, indeed, responsible environmental stewards when it comes to tackling abandonment and reclamation work. Evidence-based performance management has become paramount moving forward.
When it comes to ARO and ESG, investors want to see a plan. They want to understand a company’s long-term liability management plan and receive credible, standardized information to support long-term risk assessments. And just as important as having a plan is the need to have a way to communicate your plan that gives investors the right information in the right format.
Evaluation of ARO components that could affect an ESG assessment of your company might include:
A clear understanding of your liability costs, including non-op liability exposure, discounted and undiscounted.
Understanding your inactive wells by vintage and risk class, and associated costs.
Your compliant vs non-compliant suspended wells, risk classes, sites with reported incidents.
Year-over-year number of well sites and leases reclaimed.
“Lowest hanging fruit” liabilities to clean up, a focus on efficient and cost-effective site closure.
Planning and forecasts for cleaning up inactive suspended wells, related facilities and pipelines and the direct impact on ARO.
An established site closure budget.
Participation in ABC or other regulator closure initiatives.
To learn how XI’s ARO Manager can help with the planning and reporting of liability management, visit our website or contact us for a demo. You can also read a case study on how ARO Manager helped one company reduce the time they spent compiling ARO reports by five weeks by clicking here.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
