XI Technologies: ARO and ESG – Tackling liabilities to attract investment - BOE Report | Canada News Media
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XI Technologies: ARO and ESG – Tackling liabilities to attract investment – BOE Report

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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.

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S&P/TSX composite up more than 100 points, U.S. stock markets mixed

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TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.

The S&P/TSX composite index was up 103.40 points at 24,542.48.

In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.

The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.

The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.

The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.

This report by The Canadian Press was first published Oct. 16, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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S&P/TSX up more than 200 points, U.S. markets also higher

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TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.

The S&P/TSX composite index was up 205.86 points at 24,508.12.

In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.

The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.

The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.

The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.

This report by The Canadian Press was first published Oct. 11, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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S&P/TSX composite little changed in late-morning trading, U.S. stock markets down

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TORONTO – Canada’s main stock index was little changed in late-morning trading as the financial sector fell, but energy and base metal stocks moved higher.

The S&P/TSX composite index was up 0.05 of a point at 24,224.95.

In New York, the Dow Jones industrial average was down 94.31 points at 42,417.69. The S&P 500 index was down 10.91 points at 5,781.13, while the Nasdaq composite was down 29.59 points at 18,262.03.

The Canadian dollar traded for 72.71 cents US compared with 73.05 cents US on Wednesday.

The November crude oil contract was up US$1.69 at US$74.93 per barrel and the November natural gas contract was up a penny at US$2.67 per mmBTU.

The December gold contract was up US$14.70 at US$2,640.70 an ounce and the December copper contract was up two cents at US$4.42 a pound.

This report by The Canadian Press was first published Oct. 10, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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