London-based financial services company Quatre Ltd, has just launched a new solution known as the QUATRE MANAGED LEGACY FUNDS SOLUTION. It is designed to fund the decommissioning of oil and gas fields and rehabilitation of other extractive industrial locations including mines. Quatre Limited was founded in 2013 to provide oil and gas licensees and other extractive industries with sustainable decommissioning management solutions to optimise their long-term financial planning. Quatre’s Exit Strategy Management Solution (ESMS) evaluates Clients’ portfolio-specific exposure to the cost decommissioning of onshore and offshore wells and the reclamation of offshore and onshore facilities. Quatre has successfully applied this solution to other environmentally sensitive sectors, including mining and landfill regeneration. Current estimates for global decommissioning costs run in excess 200 Billion dollars over the next 50 years, representing an unprecedented capital spend on an activity where operator’s and service providers’ experience is still relatively immature. The Quatre team includes expertise across the fields of financial services, insurance brokerage, investment management, legal, taxation, trust management, E&P Operations and environmental liabilities.

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2. Introduction to Quatre
&
Legacy Funds
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3. Energy
Environmental
Expertise
Efficiency
I V /
Quatre Limited is a limited liability company registered in England and Wales with registered number 8521541 and registered address :
Aldgate Tower, 2 Leman Street, London. E1 8QN
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4. Strengthening Your Corporate Brand
in the Financial & Equity Investment Sector
The Path Forward
• Become a Leader in Sustainability.
• Become a Leader in Environmental Stewardship.
• Become a Leader in meeting the United Nations Sustainability Development Goals (SDG).
• Here is the pathway.
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5. Providing a Financial Solution for the Extractive Industry
• Segregated Funds are set aside to directly finance future abandonment and reclamation liabilities
• A self-funding model , funding throughout the assets life cycle
• A Tax efficient structure already embedded in certain countries Income Tax Act (Canada)
• Creditor protected, reduces uncertainty around the funding of reclamation claims in an insolvency
• Rigorous methodology , reflects individual corporate assets. Economic life and cost estimates
• Reinforces principle of individual responsibility and “Polluter Pays” no pooling or transfer to the public purse
• Funds independently managed by arm’s length Trustee and Portfolio Manager Established governance and
reporting models
• Liability funds reported as a financial asset offsetting the decommissioning liability .
• Credit capacity is enhanced
• Contribute to Sustainable Development Goals
• QUARTE Ltd has Legacy Funds for YOU
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6. Introduction to Quatre
Quatre Limited was founded in 2013 to provide oil and gas licensees and other extractive industries with
sustainable decommissioning management solutions to optimise their long-term financial planning. Quatre’s Exit
Strategy Management Solution (ESMS) evaluates Clients’ portfolio-specific exposure to the cost decommissioning
of onshore and offshore wells and the reclamation of offshore and onshore facilities. Quatre has successfully
applied this solution to other environmentally sensitive sectors, including mining and landfill regeneration.
Current estimates for global decommissioning costs run in excess 200 Billion dollars over the next 50 years,
representing an unprecedented capital spend on an activity where operator’s and service providers’ experience is
still relatively immature.
Quatre has developed an innovative suite of trust based products that allows E&P companies to set aside
funds efficiently and securely. No similar products are currently available on the market and Quatre has
positioned itself to be the leading provider of financial solutions for decommissioning.
Quatre’s suite of innovative trust services automatically stimulates and enhances Clients’ interaction with the
United Nations’ 2000 Millennial Goals, Environmental Sustainable Goals (ESGs) and the 2015 United Nations’,
Sustainable Development Goals (SDGs) through the activation of a Legacy Fund which connects Quatre with its
core activities and philosophy of delivering sustainable financial solutions for the extractive industries sector.
The Quatre team includes expertise across the fields of financial services, insurance brokerage, investment
management, legal, taxation, trust management, E&P Operations and environmental liabilities.
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7. Quatre Managed Legacy Funds Solution – Quatre Guernsey Limited
Quatre Guernsey Limited (an affiliate of Quatre Limited) will act as the trustee. Legacy Funds are created for a
specific purpose - in this case, future decommissioning costs - in accordance with the specific provisions of
Guernsey trust legislation.
The company will be regulated by the Guernsey Financial Services Commission, ensuring the highest standards of
governance, transparency and protection of trust assets.
As trustee, Quatre Guernsey Limited will be accountable to settlor companies and responsible for holding all
assets for the stated purpose of meeting future decommissioning costs.
All assets held in trust will be ring-fenced, and therefore beyond the reach of any creditors other than trust
creditors.
Consequently, the Quatre Managed Fund Solution provides a bankruptcy-protected commitment to future
decommissioning costs, providing comfort to both regulators and the public.
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8. Quatre Legacy Funds Solution – Due Diligence
At the point of establishment of each special purpose trust, documentation to be provided by each settlor company
in accordance with regulatory and best practice requirements, to include:
• Financial information and latest financial statements;
• Information and identification on substantial shareholders of privately owned E&P companies;
• Identification of authorised signatories and representatives of E&P companies;
• Evidence of source of funding, to be provided prior to transfer of funds.
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9. Legacy Funds Management – Investment Strategy
Rigorous process, including utilisation of third party investment consultants, to determine appropriate risk
strategies and appointment of a number of regulated, independent professional investment firms.
Quatre’s management of multiple funds will minimise fund management fees across the portfolio.
Risk profile of investments will be be altered for different phases of the fund life-cycle, to provide greater security of
returns in later years. The investment managers are currently targeting a 6% real return on capital investment.
Funding profiles to be agreed in advance and based upon:
• Low input initial phase;
• High input production phase;
• Final drawdown phase.
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10. The Strategy
The Trust Fund’s investment objective is to achieve sufficient growth to cover the cost of decommissioning of
facilities that still have 10+ years of operational life ahead of them. The objective closure date and the fund’s asset
allocation can be modelled to meet the company’s specific needs. However, it is anticipated that the Legacy fund’s
asset allocation will become more conservative as the closure date approaches, moving from higher risk (equity) to
mainly lower risk (fixed income) investments, with the aim of reducing volatility and the risk of capital erosion.
The CFOs strategic tool: The solution provides a strategic tool for the company’s CFO, enabling the effective
management of the liability with a minimal impact on the ability to raise finance (debt/equity), unlike more
conventional solutions e.g letters of credit. The concept of regular contributions enables the CFO to more
effectively manage cash flow. Provides security to investors and stakeholders that the liability is managed in a cost
effective and efficient way.
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11. The Fees
The management fees quoted cover the investment management costs, but also Trustee, legal, tax and technical
input required from Quatre to manage the fund.
Fees will depend on size of investment and complexity of individual cases, and are likely to vary with the size of
the fund, however 2.5% is an initial estimate of the likely quantum of total costs.
We are transparent with regard to costs and fees and able to provide further quotes and information based on
specific circumstances.
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12. Legacy Funds Management – Reporting and Information Flow
Reporting by the trustee (Quatre Guernsey Limited) to each settlor company will be tailored to their individual
requirements.
Reporting requirements either formally designated within the trust documentation or agreed flexibly with each
settlor company, offering benefits of either certainty of fixed reporting or flexibility of easily adaptable future
reporting.
The initial suggestion would be monthly (or at most quarterly) reporting to settlor companies giving them regular
information on their investments.
Reporting should include information on projected payment model, cash flow, expenditure and investment
performance and valuation.
Accounting Treatment
PwC Guernsey and Deloitte Canada have both advised that the assets of the trust can be recognised on
the balance sheet, to part-offset the value of the liability on the balance sheet. In addition, if the trust is set
up as a Canadian Qualifying Environmental Trust (“QET”), corporation tax deductions will be available on
the contributions to the QET.
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13. Summary – Advantages of a Decommissioning Liability Fund
Segregated Funds are set aside to directly finance future abandonment and reclamation liabilities
A self-funding model , funding throughout the assets life cycle
A Tax efficient structure already embedded in certain countries Income Tax Act (Canada)
Creditor protected, reduces uncertainty around the funding of reclamation claims in an insolvency
Rigorous methodology , reflects individual corporate assets. Economic life and cost estimates
Reinforces principle of individual responsibility and “Polluter Pays” no pooling or transfer to the public purse
Funds independently managed by arm’s length Trustee and Portfolio Manager
Established governance and reporting models
Liability funds reported as a financial asset offsetting the decommissioning liability .
Credit capacity is enhanced
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14. Lack of suitable, efficient alternatives to Purpose Trusts
Decommissioning Insurance Products
The marine and energy insurance markets have designed policies to address specific decommissioning risks,
including contractual liability exposures, seepage, pollution and contamination risks.
In addition it is possible to extend standard removal of wreck cover to address risks unique to decommissioning
projects. Such policies provide platform operators with extra cost and expense cover and, if required, physical loss
and damage cover.
However, these insurance policies deal with the risks associated with the decommissioning process and not the
cost of actually performing decommissioning.
Decommissioning is an event that is certain to take place - it is a requirement of the license / permit to drill of the
E&P operations. As such it is not a fortuitous event which is a requirement of the construct of a contract of
insurance.
The uncertainty that does exist in relation to decommissioning relates to timing and cost, and to some extent
whether the E&P company will be a going concern able to fund and execute decommissioning. There is no current
conventional insurance product that can deal with the funding of decommissioning.
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15. Captive Insurance Models
A “captive” in its purest form is a wholly-owned insurance subsidiary of the party that purchases insurance from it.
Such companies are costly to set up and administer, and there is the possibility of conflicts of interest between the
captive and the holding company.
Captives are classed as insurance companies and therefore can only be used to insure fortuitous risks.
Decommissioning costs do not represent a fortuitous risk and therefore are not insurable other than with regard to
the risk of the financial failure of the E&P company.
However it is not possible for an insurance company owned by an E&P company to provide insurance against the
financial failure of that E&P Company.
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16. Financial Performance Bonds
There is a section of the insurance market that issues performance bonds which could potentially be used to fund
decommissioning.
These bonds are effectively insurance policies that would provide funds in the event of the financial failure of the
E&P company.
However there are a number of issues with this potential solution, not least:
(i) the capacity in this sector of the insurance market is nowhere near sufficient to respond to the needs of all E&P
companies;
(ii) the price of the insurance will be driven by an insurer’s view of the future credit worthiness of the E&P company
company - they would be making an assessment 25 years into the future, an impossible task, and it would be likely
that only the very strongest of E&P companies would be offered the limited capacity in the market - the price would
be significant and the E&P company would still remain liable to address the costs of decommissioning to the extent
that is able to do so.
This is not a viable or attractive solution to the funding of decommissioning costs.
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17. Letters of Credit
A letter of credit is an arrangement whereby a bank (the issuing bank) acting at the request of a customer is to
make payment to or to the order of a third party, in exchange for stipulated documents. In the context of
decommissioning security, a key disadvantage of the letter of credit is that it ties up capital (because it is usually
issued for the full anticipated cost of decommissioning, and countersecurity is usually required by way of a cash
deposit with the issuing bank).
This in turn reduces the customer’s debt capacity, and increases its cost of capital. The increase in the cost of
capital may to some extent be tax deductible (in the case of the UKCS, loan interest is allowed against Corporation
Tax (CT), but not against the Supplementary Charge (SC) nor the Petroleum Revenue Tax (PRT)).
In these times of increased commodity price fluctuation, capital cost increase can shorten marginal field longevity
and ultimately impact a host nation’s energy security.
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18. Escrow Accounts
The term “Escrow” could be used to refer to a number of different legal concepts, not all necessarily involving a
trust or imposing on the escrow agent the duties of a trustee.
However, escrow arrangements have this in common that they usually only pay interest (negligible at the
moment)—unlike funds held in the Quatre purpose trust, which will be invested.
As a matter of terminology, Quatre prefers the more specific description of a “trust”, which better conveys the
protections that arise from the purpose trust structure under Guernsey law, and the benefits that arise from
investment.
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19. Legacy Funds
Sustainable Financial Solution
for
Decommissioning &
Reinstatement
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20. Building a sustainable solution
requires taking a series of defined
steps..
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21. Action 1: Create a Legacy Fund managed by independent
investment professionals
• Achieves an optimum balance of real return and protection
• Ensures access to independent assessment of costs
• Allows the contribution profile to be adjusted
• Fully transparent and accountable
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22. Why invest sustainably?
Sustainable investing covers a wide range of different risk, liquidity and environmental considerations.
It is not possible to take a “one size fits all” approach and we would have a discussion with interested parties
around what it means to and for them and how to tailor a suitable approach for the relevant circumstances.
We do have first-hand experience of sustainable investment funds and portfolios that have matched and exceeded
returns of traditional portfolios and indices.
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23. Action 2: Sustainable Investing
• Sustainable companies have good corporate governance, and are focussed on desirable products and good
brands
• They are well run companies – guaranteeing financial reporting, brand, socially and environmentally aware,
good staff
• They offer competitive financial returns
• Investing in companies which will be around for the long term and are best in class
• Active engagement with these companies
• Sustainable funds are achieving excellent investment returns whilst investing in companies having a positive
impact on society and the environment.
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25. Action Outputs
Required Future Fund Value $200,000,000
Gross rate of return per annum* 7.5%
Quatre fees 2.5%
Net rate of return per annum 5.0%
Number of years 25
Required payment per annum $3,990,944.25
Total cash contributions $99,773,606.19
Less Federal Tax relief @ 15% $-14,966,040.93
Cash cost to the company $84,807,565.26
Production per annum 40,000
Ave Price Per Bbl $35
Cash Flow per annum $511,000,000
% of cash flow required 0.7810%
The annuity due payment formula using future value
is used to calculate each equal cash flow or payment
of a series of cash flows when the future value is known.
The formula is specific to annuities where the initial
cash flow is received immediately
* As Directed in C.O.B.S Annex 2 . www.handbook.fca.org.uk
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26. So Where’s the Sustainability ?
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27. Reaction 1
• As soon as an entity commits to the Legacy Fund
• Depending on whether it is Offshore or Onshore
• It is committing to Sustainable Development Goals (SDG)
• SDG14 Life Below Water
• SDG15 Life on Land
• During the Operational Life Cycle it is contributing to
• SDG 8 Decent Work and Economic Growth
• SDG 9 Industry, Innovation and Infrastructure
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28. Legacy Fund – SDG Interaction
17 Sustainable Development Goals
Goal 1 - End poverty in all its forms everywhere
Goal 2 - End hunger, achieve food security and improved nutrition and promote sustainable agriculture
Goal 3 - Ensure healthy lives and promote well-being for all at all ages
Goal 4 - Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all
Goal 5 - Achieve gender equality and empower all women and girls
Goal 6 - Ensure availability and sustainable management of water and sanitation for all
Goal 7 - Ensure access to affordable, reliable, sustainable and modern energy for all
Goal 8 - Promote sustained, inclusive and sustainable economic growth, full and productive employment
and decent work for all
Goal 9 - Build resilient infrastructure, promote inclusive and sustainable industrialization and foster
innovation
Goal 10 - Reduce inequality within and among countries
Goal 11 - Make cities and human settlements inclusive, safe, resilient and sustainable
Goal 12 - Ensure sustainable consumption and production patterns
Goal 13 - Take urgent action to combat climate change and its impacts*
Goal 14 - Conserve and sustainably use the oceans, seas and marine resources for sustainable
development
Goal 15 - Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage
forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss
Goal 16 - Promote peaceful and inclusive societies for sustainable development, provide access to justice
for all and build effective, accountable and inclusive institutions at all levels
Goal 17 - Strengthen the means of implementation and revitalize the global
partnership for sustainable development
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29. ACTION + REACTION =
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30. QUATRE’S
LEGACY FUNDS
A SUSTAINABLE FINANCIAL
SOLUTION
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32. For more Information, about this multidisciplinary team of financial services and operational professionals,
working in a collaborative forum to deliver a fully integrated special purpose trust solution to the challenges
of decommissioning cost effectiveness, please contact
Paul Jardine: paul.jardine@quatre-ltd.com
Ian McConnell: ian.mcconnell@quatre-ltd.com
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33. Useful Links
United Kingdom
Oil & Gas Authority OGA https://www.gov.uk/government/organisations/oil-and-gas-authority
Business, Energy & Industrial Strategy https://www.gov.uk/government/organisations/department-for-business-
energy-and-industrial-strategy
HSE Oil & Gas http://www.hse.gov.uk/offshore/
COBS https://www.handbook.fca.org.uk/handbook/COBS.pdf
Canada
National Energy Board https://www.neb-one.gc.ca/index-eng.html
Alberta Energy Regulator https://www.aer.ca/
Mining Act Tax Reference http://miningtaxcanada.com/taxation-framework/
QET Alberta http://www.finance.alberta.ca/publications/tax_rebates/corporate/corp39.html
Denmark
Danish Energy Agency https://ens.dk/en
United Nations Sustainable Development Goals
https://www.un.org/sustainabledevelopment/sustainable-development-goals/
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