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6 December 2022

OneNexus boosts ARO liability product

OneNexus has announced milestones in its endeavour to address the growing unfunded Asset Retirement Obligation (ARO) liabilities within the upstream oil and gas industry.

The financial risk and decommissioning management company aims to prevent oil and gas wells from becoming orphaned or environmental hazards by ensuring that these decommissioning liabilities are funded far into the future.

It has formed a new entity, OneNexus Services, for the purposes of distributing, underwriting, and servicing its newly formed ARO liability solution product, OneNexus Assurance.

Steven England will serve as president to OneNexus Services. Most recently, he led underwriting operations in the upstream oil and gas sector, specialising in the control of well, property and general liability. He has worked with insurance brokers, carriers and reinsurers throughout North America, London and Bermuda.

OneNexus and its wholly owned captive insurance company, OneNexus Oklahoma Captive Corp (OOCC), have entered into a definitive agreement with Munich Re Energy Transition Finance (MRETF) to provide regulatory capital for OOCC. MRETF’s financial commitment, along with capital provided by OneNexus’ founding members, ensure that OneNexus has sufficient capital to cover up to $1.2 billion in ARO liabilities.

Following OneNexus’ agreement with MRETF, OneNexus Services entered into an exclusive referral partnership with the Texas Series of the Lockton Companies, for the purpose of providing a solution to oil and gas operators, private equity sponsors, reserve-based lenders, and acquisition and divestiture specialists for managing and financing ARO liabilities. Lockton is a risk management, risk finance and insurance advisor to the global energy industry.

Launched in June 2021, OneNexus Assurance is focused the large and growing amount of AROs liabilities, which are the unavoidable costs associated with retiring assets. If neglected, the number of orphaned wells in the US will continue to increase, leaving a burden on taxpayers and creating environmental hazards.

“For operators, the legal obligation to plug and abandon oil and gas wells is a constant, and often costly, concern,” England said. “OneNexus Assurance helps operators mitigate future risk and uncertainty by funding tomorrow’s P&A liabilities with today’s dollars.”

Most ARO liabilities held on energy company balance sheets remain largely underfunded. OneNexus Assurance, similar to an insurance policy, was developed utilising actuarial models and methods just like those used in the universal life insurance industry. Having an ARO agreement in place becomes especially valuable when a well is spud or when a portfolio of wells is sold.

OneNexus is also supporting environmental, social and governance (ESG) initiatives by providing operators a way to plan for the retirement of aging wells–declining hydrocarbon producing assets (wells, facilities, production and gathering systems, etc.) left in disrepair can pose a significant environmental threat.