I was reading the BOE Report on the weekend and see that the AER has suspended Sanling Energy’s operations.
I think the question that should be asked is why did they wait so long to do this? There were an abundance of red flags. First off, their LLR in Alberta is well below 1, which should trigger a security deposit. According to the article, they owe $67 M in security deposits and it appears that they haven’t paid this yet.
I would guess that Sanling Energy probably doen’t have $67 M to pay the government. In addition, according to XI Technologies ARO Manager in their AssetBook platform, Sanling has a backlog of $51.3 M in Abandonment and Reclamation work that should have been done but isn’t. See the image below:
Here is a video I did that shows the overall impact not only on Sanling, but also on their partner companies.
Sanling Energy has 722 licenses on wells that they do not operate, so each one of those companies are going to be on the hook for covering the costs to abandon those wells. For example, Canadian Natural Resources will be on the hook for approximately $4.9 M in well abandonments.
Unfortunately, there are bound to be more oil and gas companies in Western Canada that will share the same fate and these assets will only end up in the Orphan Well Associations ever growing inventory.