OneNexus Provides Breakthrough Solutions to Oil and Gas Operators’ Decommissioning Efforts
OneNexus Forms New Distribution Entity and Names President; Inks Definitive Funding Agreement with Munich Re; Appoints Lockton Companies, LLC as Exclusive Referral Partner
OneNexus LLC, the industry’s leading financial risk and decommissioning management company, today announces several significant milestones in its endeavor to address the growing unfunded Asset Retirement Obligation (ARO) liabilities within the upstream oil and gas industry.
- OneNexus LLC has formed a new entity, OneNexus Services, LLC, for the purposes of distributing, underwriting, and servicing its newly formed ARO liability solution product, OneNexus Assurance™.
- Steven J. England will serve as President to OneNexus Services. England is a veteran insurance professional with more than 30 years’ experience building and leading underwriting and distribution organizations. Most recently, England led underwriting operations in the upstream oil and gas sector, specializing in control of well, property and general liability. He has worked with insurance brokers, carriers and reinsurers throughout North America, London and Bermuda.
- OneNexus, LLC 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”), a wholly-owned subsidiary of AA-rated global reinsurance company Munich Re AG, 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, LLC, 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 one of the leading risk management, risk finance and insurance advisors to the global energy industry.
These strategic moves by OneNexus are designed to support the company’s launch of OneNexus Assurance, an ARO solutions product that provides energy operators with a clear path to funding their long-term decommissioning liabilities.
“For operators, the legal obligation to plug and abandon (P&A) oil and gas wells is a constant, and often costly, concern,” says Steve England, President, OneNexus Services. “OneNexus Assurance helps operators mitigate future risk and uncertainty by funding tomorrow’s P&A liabilities with today’s dollars.”
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England explains that most ARO liabilities held on energy company balance sheets remain largely underfunded. OneNexus Assurance offers an effective solution to address ARO liabilities. The product, similar to an insurance policy, was developed utilizing 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.
“As energy companies continue to operate and grow, addressing long-term liabilities must become part of their strategy – their license to operate – given the public’s sentiment around the environment,” said David de Roode, Lockton Partner and Executive Vice President. “Future costs to decommission these assets will continue to rise. OneNexus understands the costs and risks and is actively working with companies to plan appropriately and responsibly. Moreover, OneNexus Assurance is the answer to the financial assurance burden that has historically killed transactions; we see this is as a liability solution similar to Representations and Warranties insurance as well as an alternative or companion to traditional P&A bonds.”
Launched in June 2021, OneNexus, LLC is focused on addressing a key issue that has plagued the U.S. onshore oil and gas industry: 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 U.S. will continue to increase, leaving a burden on taxpayers and creating environmental hazards.
“Our mission is to help energy companies become proactive in addressing their decommissioning obligations,” says Tony Sanchez, Co-Founder of OneNexus. “OneNexus products ensure that funding for P&A activities is available, no matter who owns the wells, far into the future.”
Source: OneNexus and Lockton