Oil & Gas Industry Embraces Innovative Decommissioning Liability Solution
JUNE 13, 2023 — OneNexus, the leading provider of innovative solutions for managing oil and gas Asset Retirement Obligations (ARO), is proud to announce the signing of new contracts with several E&P operators, underscoring the growing market interest in OneNexus Assurance as a superior solution for addressing decommissioning and reclamation liabilities.
OneNexus Assurance is an insured financial contract that provides guaranteed funding for future oil and gas decommissioning expenses. The unique contract structure, akin to a universal life insurance policy, ensures that capital is reserved to plug wells at the end of their useful life, thus assuring the E&P company and its stakeholders that funding is safely secured for future decommissioning liabilities.
OneNexus Assurance is demonstrating its value in significant real-world applications.
Recently, a Texas E&P company (“Client”), with minority working-interest partners, employed OneNexus Assurance for assets that it operates in west Texas. The Client was concerned about the risk that its company might have to solely shoulder the lion’s share of decommissioning liabilities associated with the asset, because it can often be difficult to collect from non-operating partners once wells are depleted and their cash flows have dried up.
The OneNexus Assurance contract structure enables the Client to collect for the cost of decommissioning from its partners on a monthly basis while well production and cash flows are still strong. This innovative structure ensures that ARO funding is secured and available before wells cease production.
Moreover, spreading ARO funding over a period of time offers a significant discount to the overall gross liability; helps minimize the impact to cash flows; and eliminates the risk of non-payment by non-operating partners and account shortfalls down the road.
In short, the OneNexus Assurance contract provides certainty to the E&P company and its stakeholders that, irrespective of who owns the wells or is responsible for decommissioning in the future, its ARO liabilities are completely funded up to the benefit amount purchased.
“Our business model provides the oil and gas industry much-needed peace of mind that capital is available when inevitable ARO funding becomes imminent and offers a preferable alternative to trust funds, surety bonds, and sinking funds as a means of prefunding decommissioning liabilities,” said Tony Sanchez, Founder and CEO, OneNexus.
By holding payments as premium in a regulated insurance company, OneNexus Assurance offers several benefits over traditional decommissioning liability ARO financing methods, such as surety and sinking funds:
- Unparalleled permanency: funding is secured in a ‘lockbox’ licensed and regulated insurance company.
- Added security: funding is managed by independent insurance professionals, actuaries, and regulators to ensure stringent oversite of the decommissioning funds. Moreover, the reserve capital for the insurance company holding the contract is provided by Munich Re, a global AA-rated insurance company, who has been in business for more than 100 years.
· Prudent governance and risk management: enables companies to comply with regulatory requirements and manage their ARO risk exposure.
“OneNexus Assurance is a game changer,” said Sanchez, “It enables responsible parties to pay towards decommissioning funding in today’s dollars at a substantial discount to the ultimate plugging cost, it guarantees that a pre-determined amount decided by the client is secured for the future, and it does away with the need to chase payments later.”
For more information on OneNexus and the OneNexus Assurance product, visit www.onenexus.com.
About OneNexus: OneNexus is a leading provider of financial solutions for the oil and gas industry. Our pioneering product, OneNexus Assurance, provides a secure, sustainable, and prudent method of funding decommissioning expenses, providing unparalleled permanency and security for all stakeholders.