SystemDrilling, Wells & Decommissioning

Asset Retirement Obligation Management

Asset retirement obligation management for finance and cost engineering: each dollar of the liability graded by its evidence, and estimates revised from what closed plugging jobs really cost.

See the demo Book a demo

Follow one plugging campaign into the book ↓

The problem

An auditor asks what one well's number rests on, and the answer is a table

A producer's retirement liability covers thousands of wells and facilities. Platforms and large facilities often have site studies. Many more wells carry a flat value per well from an old corporate table, re-indexed each year, and some carry nothing at all. It reaches the auditors as one number and a roll-forward, with the support for each line spread across tables, memos and old estimates.

When a plugging campaign closes, its invoices show what the work really cost. That cost rarely flows back to the similar wells still carried at the flat value, because finding them means reading well files and platform records the accountants do not hold. So the gap stays on the book until the next campaign shows it again.

Built forRetirement accountantsCost engineersCorporate controllersReporting managers

The Problem Today

Retirement liabilities run on flat values and old studies, and reach auditors as one number.

Pieced together today

Well tables
Studies
Invoices
Well files

Flat values stay flatClosed jobs rarely reach the wells still carried
Support is hard to showOne well's number traced through tables and memos

The Solution

Each dollar gradedSite study, actual cost, benchmark, deemed value or no support
Closed jobs testedInvoices compared with what the book carried, every quarter
Similar wells foundCost drivers tested well by well, with a reason for each one left out
Revision drafted, two signLayer math and journal shown; engineer and controller both sign

Built-in controls

Controller opens the invoices before signing
One person parks a journal, another posts it
A change after a signature needs a fresh check

What You Get

Each obligation carries its grade of evidence, and estimates move with what the work really cost.

One well, all the way downEstimate, drivers, history and sources for any obligation
A roll-forward that tiesLayers, journals and the ledger account in agreement
Revisions with two namesEngineer and controller, each after opening the evidence

Quarter close, one morning

Asset retirement obligation at quarter end: 24% of $1.38B rests on flat values

A producer is closing the quarter. A campaign that plugged 41 deep platform wells has just been settled, and every one of those wells had been carried at the same flat value.

demoFields, wells, invoices, people and every dollar are sample data.

0108:30
$1.38B carried, and $335M of it rests on a deemed value or nothing
Asset retirement accountant
The evidence bar splits the liability by what supports each dollar, strongest on the left: site studies, actual cost, benchmarks, deemed values, no support. Each band opens its obligations. Below it the quarter runs from opening to closing balance, with accretion, new wells, settlements and revisions, and the difference to the ledger system.
0209:04
The deep well campaign closed 37.9% over what the book carried
Asset retirement accountant
The closed jobs are tested against what was carried, with a tolerance. The deep well campaign carried $190.24M and cost $262.40M. A pad plugging batch ran 19.5% over and a shallow batch 13.7% under. The agent says what it proposes for each and hands the revisions to the cost engineer; a partner job with no actuals yet cannot be tested.
0309:05
A milled well cost $6.83M against the $4.64M carried
Decommissioning cost engineer
The campaign bridge walks from the carried value to a milled well: a higher rig spread rate, extra rig days, services and cement, and a share of mobilization and weather. 29 of the 41 wells had poor cement and were section milled. Each well's line shows rig days, whether it was milled, carried, actual and the gap. An unreadable invoice header is held, not guessed.
0409:06
35 more wells share the cost drivers, and 27 are left out with a reason
Similar well finder
The 62 wells still carried at the flat value are each tested against five drivers from the platform and well file. Same platform build, deviated past 40 degrees, pressure on the B annulus, poor cement behind the casing, tubing and packer still in: those are the five. Poor cement is a must. 35 are proposed, four of them close calls the engineer must open.
0509:16
The engineer opens all four close calls, then signs $76.6M before discounting
Decommissioning cost engineer
The revision shows its working: 35 wells at $2.189M each, by settlement year, escalated and discounted at the rate for each year, $69.19M on the book. He opens each close call; all four share the poor cement at the seal. Only then can he sign the estimate. The journal is drafted, not posted, and waits for the second signature.
0609:24
The controller cannot sign until he opens an invoice for each driver
Corporate controller
The signature ladder lists four invoices, one behind each part of the uplift: rig spread rate, extra rig days, services and cement, mobilization and weather. He opens each from the contractor's own invoice, and each turns to opened. Only with all four open is he offered the signature; at 09:28 he signs, with the reason that the records support the working.
0709:32
The accountant parks the journal, and the ledger team posts it
General ledger accountant
After the controller signs, the asset retirement accountant parks the journal: debit asset retirement cost for each field, credit the retirement obligations account, $69.19M. She cannot post her own journal. The general ledger accountant posts it, and the revision reads $69.19M on the book, with every signature and opening listed beside it.
0809:34
The ARO roll-forward ties to the ledger to the dollar
Financial reporting manager
The quarterly ledger runs each layer from opening balance through accretion, incurred, settled and revisions to closing. Every journal this quarter is listed with who prepared and who posted it. After a misposted overhead amount is reclassed, the book and the ledger account agree: difference $0. The quarter's sign-off lists what it still waits for.
0909:40
$1.45B carried, and flat or unsupported dollars fall to 13%
Asset retirement accountant
Back on the evidence bar, the actual cost band has grown by the campaign and its similar wells, and the deemed value band has shrunk by the same wells. The liability is now $1.45B, and $190M of it rests on a deemed value or nothing. Each band still opens its obligations, so when an auditor next asks for one well, all the way down, the answer starts on this screen instead of in a spreadsheet.

One milled well, 35 similar wells and $69.191M on the book

The arithmetic on the revision screen, before and after discounting by settlement year.

A milled well, from the closed campaign	$6.829M
Less the flat value carried	− $4.640M
Added per similar well	$2.189M
Across 35 similar wells, before discounting35 × $2.189M	$76.615M
On the book, escalated and discounted by settlement year	$69.191M

demoSample data, from the working solution.

Around the book

The obligation book, one well's working, assumptions and the note

What the accountant, the reporting manager and the auditor open after the morning.

Book of 3,023 asset retirement obligations with support grade, share, estimate today, settlement year and carrying amount — **The book**3,023 obligations, $1,449.31M, each with its support, share, estimate, settlement year and carrying amount. Filter by support or field and export.

One well's retirement estimate: rig days and services, the five cost drivers it matches, and the estimate's history — **One well, all the way down**How the estimate adds up, the five drivers from the campaign, the estimate's history and the sources behind each value.

Assumption record of changes to rates, tables and estimates, each with maker, signer and source — **Assumption record**Every change to a rate, table, rule or estimate, with who made it, who signed it and the source.

Draft decommissioning provision note with the balance roll-forward, waiting for open revisions to be decided — **Financial statement note**The note drafted from the roll-forward, with balance lines that tie to the book. It cannot be approved until revisions are decided.

Audit trail of the revision, from invoices opened to journals posted, with the external auditor's requests and downloads — **Audit trail and evidence**Every agent step and decision in order, with the auditor's requests and their downloads beside it.

demoSample data, from the working solution.

Who prepares, who signs, and who posts

The person who prepares never signs or posts the same step.

Asset retirement accountant

Sees: The evidence bar, closed-job tests and the roll-forward
Signs: Parks journals; cannot post her own

Decommissioning cost engineer

Sees: Campaign bridges, similar wells and close calls
Signs: Signs each estimate after opening the close calls

Corporate controller

Sees: An invoice behind each cost driver
Signs: Signs revisions, rates and the quarter

General ledger accountant

Sees: Parked journals
Signs: Posts them to the ledger

Financial reporting manager

Sees: The ledger tie and the note
Signs: Approves the note once the book ties

The agents

Evidence grader to revision drafter: what each agent will not touch

They grade, read, test and draft. Amounts move only with signatures.

Evidence grader

Grades each obligation's support.

Never changes an amount
Never upgrades without a document

Job cost reader

Ties invoice lines to wells.

Never guesses a value on an unreadable page

Estimate tester

Compares closed jobs with what was carried.

Never revises an estimate

Similar well finder

Tests each flat-value well against the cost drivers.

Never treats a shared value as a shared cost

Revision drafter

Drafts the revision with its layer math and journal.

Never signs, parks or posts

Ledger tie-out agent

Ties the book to the ledger account and lists differences.

Never posts a correction

What controllers and cost engineers ask about asset retirement obligations

What is an asset retirement obligation?

An asset retirement obligation is the liability to plug wells and remove facilities at the end of their life, carried at its present value. This solution grades the evidence behind each asset retirement obligation, tests closed jobs against what was carried, and drafts revisions that the cost engineer and controller sign.

How does it handle ARO estimate reconciliation after a campaign?

The estimate tester compares each closed job's invoices with what the book carried. Where the gap is outside tolerance, the similar well finder tests the wells still carried at the old value and proposes a revision for the ones that share the cost drivers.

Is this ARO management for oil and gas only?

It is built around wells, platforms, pads and pipelines, with rig days, milling and cement as cost drivers. Facilities and other assets are graded the same way.

Does it work for a decommissioning provision as well?

Yes. The obligation, layers, accretion and roll-forward are the same work; the rates and rules in settings follow your own accounting policy.

Who posts the journal entry?

The asset retirement accountant parks it after both signatures, and a general ledger accountant posts it. Nobody posts a journal they prepared.

What does an auditor get?

Any obligation all the way down: the estimate, its drivers, its history and sources, plus the audit trail, the assumption record and downloads for each request.

Drilling, Wells & Decommissioning