OneNexus Secures Financing From Global Reinsurance Company Munich Re
AA-Rated Reserve Capital Backstop Uniquely Positions OneNexus to Finance up to $1.2 Billion of Energy Industry Asset Retirement Obligations
HOUSTON–(BUSINESS WIRE)–OneNexus, LLC and its wholly-owned captive insurance company, OneNexus Oklahoma Captive Corp. (“OOCC”), today announced that they 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 for the purpose of providing backstop capital for OneNexus’ new Asset Retirement Obligation (ARO) funding product. The partnership between OneNexus and MRETF provides a framework by which ARO funds are secured in a regulated structure, presenting the oil and gas industry with a cost-effective and superior option to reduce its environmental footprint by proactively addressing its decommissioning liabilities. MRETF’s financial commitment, along with capital provided by OneNexus’ founding members, ensures sufficient capital for OneNexus to cover up to $1.2 billion in ARO liabilities.
OneNexus, LLC – launched in June 2021 – is focused on addressing a key issue that has plagued the US onshore oil and gas energy industry: the large and growing AROs, which are the unavoidable costs associated with retiring long-lived hydrocarbon producing assets (wells, facilities, production and gathering systems, etc). The ARO liabilities held on energy company balance sheets remain largely unfunded. If these liabilities are neglected, the number of orphaned wells in the United States will continue to increase, leaving a burden on taxpayers and creating environmental hazards that will eventually contaminate the surrounding soil and groundwater, and contribute to atmospheric emissions of methane, a potent greenhouse gas.
OneNexus and MRETF are addressing the Environmental, Social, and Governance (ESG) problem of wells remaining unplugged at the end of their useful economic life. OneNexus has structured the company to address the major underlying issues that lead to wells remaining unplugged long after they cease producing, primarily the lack of funding to pay for the decommissioning costs. OneNexus, utilizing its captive insurance company (OOCC), safeguards funds in a licensed, regulated “lock box” structure until the capital is needed for the decommissioning of the oil and gas wells. Taking the process a step further, OneNexus will take title to the plugged wells, ensuring that the wells do not present further risks in the future.
As energy companies continue to enhance their ESG reporting and targets, planning for decommissioning must be part of their strategy to address long-term liabilities. Future costs to decommission these assets continue to rise as oil and gas field development becomes more complex. OneNexus’ industry experts understand these costs and risks and work with companies to plan appropriately and responsibly for the future.
“As we get down to the business of managing ARO liabilities and plugging wells, we will be helping energy companies become proactive in addressing their decommissioning obligations,” says Tony Sanchez, co-founder of OneNexus. “OneNexus products will ensure that funding for plugging and abandonment activities is available, no matter who owns the wells, far into the future,” Mr. Sanchez concludes.
Vikram Nath, Managing Director, Munich Re Energy Transition Finance, comments, “The transaction with OneNexus demonstrates our unwavering commitment to energy transition. Unplugged or improperly plugged oil and gas wells might lead to harmful emissions, but to date there has been no solution that could address this problem head-on.” Mr. Nath goes on to say, “We have worked closely with the OneNexus team in structuring this product and are confident that, as this product gains acceptance, it will be a win-win solution for all stakeholders.”
ABOUT ONENEXUS LLC
OneNexus LLC is a financial risk and decommissioning management company that focuses on solutions relating to Asset Retirement Obligation (ARO) liabilities in the energy industry. OneNexus’ mission is to prevent oil and gas wells from becoming orphaned or environmental hazards by ensuring that these liabilities are funded far into the future to provide for proper decommissioning. Headquartered in Houston, Texas – the energy capital of the world – the company was founded by a network of seasoned energy industry executives, in partnership with KKR affiliate BlackGold Capital Management LP, who are driven to solve the complex problem of retiring oil and gas assets in a safe, reliable, and cost-effective manner. For more information, please visit onenexus.com.
ABOUT MUNICH RE / MUNICH RE ENERGY TRANSITION FINANCE:
Munich Re is one of the world’s leading providers of reinsurance, primary insurance and insurance-related risk solutions. The Group consists of the reinsurance and ERGO business segments, as well as the asset manager MEAG. Munich Re is globally active and operates in all lines of the insurance business. Since it was founded in 1880, Munich Re has been known for its unrivaled risk-related expertise and its sound financial position. Munich Re Energy Transition Finance Inc. based in Houston, Texas, is a wholly-owned subsidiary of Munich Re. To comply with and support the Paris climate agreement, Munich Re is targeting net-zero carbon emissions from risks with the upstream oil & gas industry by 2050. Within the pathway to reach this goal, Munich Re will continue to support clients in the alternative debt financing for the energy transition sector with solutions that enable our clients to achieve their own ESG goals, e.g., by realizing carbon capture and sequestration projects that contribute to mitigating climate change.
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