Transaction helps position industry to tackle swelling inventory of inactive wells
CALGARY, Nov. 21, 2019 /CNW/ - Skye Asset Retirement Inc., ("Skye" or the "Company") announced today that it has entered into the first ever Sale and Funding Agreement ("SFA") to acquire the licenses and associated liability for a package of oil and gas wells that Skye will take through full closure and restoration. The wells are located in Saskatchewan and are being acquired from an undisclosed party.
Under the SFA, Skye will receive cash considerations equal to the estimated cost to obtain full regulatory closure of the properties, a process that requires decommissioning, remediation and restoration of the sites to their original condition.
Skye provides a turnkey solution for the retirement, remediation and full reclamation of inactive oil and gas wells, facilities and pipelines. In doing so, Skye enables solvent oil and gas producers to focus on their producing assets, while reducing the total inventory of inactive infrastructure. This, in turn, reduces the potential for inactive sites to become orphans, that is, sites that no longer have an owner that can be held accountable.
"This acquisition proves there is now a simple and cost-effective way for oil and gas companies to reduce their liability and asset retirement obligations, while also making progress achieving their social and environmental responsibility goals," said Skye's Chief Executive Officer, Ryan Smith. "Skye has an expert team and a singular focus on closing well sites in the most efficient, safe, and cost-effective method possible."
Under Skye's unique business model, Skye takes full ownership of the wells and is responsible for their reclamation. The Company's team has extensive experience in well abandonment and site reclamation, and with its sister company, 360 Energy Liability Management Ltd. ("360"), has managed abandonment activities on more than 1,000 wells and has performed reclamation and closure activities on over 2,700 sites.
"We provide a proactive solution to the oil and gas industry's longstanding challenge of managing liability by focusing on what we do best – decommissioning inactive wells and returning the land to its original state," Smith said. "We look forward to helping our partners manage their long-term liabilities while ensuring the landscape is fully restored to its original condition for the benefit of landowners, municipalities, provinces and all Canadians."
Each of Skye's acquisitions is underwritten by a proprietary insurance product, which de-risks the process through to completion. Skye's business model works within existing policy and requires no special exemptions or regulatory changes to provincial frameworks.
Saskatchewan, Alberta and British Columbia currently have approximately 140,000 inactive wells, approximately five percent of which are considered orphans, according to provincial regulators. The number of inactive wells is estimated to double by 2030.
Orphan wells represent an ongoing and growing hazard to landowners, both financially and environmentally, as legacy equipment and potential contaminants prevent the land from being restored to its original state. Left unaddressed, the cost of the clean-up could outstrip the capacity of the industry-funded Orphan Well Associations and could ultimately fall to taxpayers.
About Skye Skye is a liability acquisition company and the sister company of 360 Energy Liability Management Ltd., which brings to the market a proven methodology to streamline the asset retirement process. In the past five years, 360's leadership team has assessed over $4 billion in liabilities, has managed abandonment activities on more than 1,000 wells and has performed reclamation and closure activities on over 2,700 sites. Founded in 2017, Skye has worked with regulators and industry groups across Western Canada to establish a framework for a liability transfer and built a proprietary insurance product to backstop each independent transaction. Skye is not an oil and gas producer and the company's singular focus is asset retirement; it acquires liabilities then sees the property through abandonment, remediation, and reclamation to regulatory closure.