Oil and Gas Accounting and Performance Measurement

Introduction

This five-day programme develops an essential understanding of Oil & Gas Exploration & Production (E&P) accounting, reporting and performance measurement issues and practices. It develops your ability to prepare, use and critically evaluate information on E&P activities, applying specialist industry knowledge and relevant analytical skills.

Seminar Objectives

By the end of the programme, delegates will have learned:

• The meaning and significance of financial reporting policies and practices adopted by E&P companies
• How to provide relevant financial information on E&P activities that meets the needs of users and complies with financial reporting standards
• How to develop and use key performance indicators (KPIs) to continuously improve performance within their organisation
• How to compare the business performance of companies in the E&P industry

Who Should Attend?

This programme is designed specifically for all who work with financial information and measures of performance for E&P activities. A basic understanding of financial statements and the recording of financial transactions is required.

Organisational Impact

Employer organisations will benefit as staff return from this course with:

• A wider understanding of the accounting and financial reporting implications of the work they do
• A greater appreciation of the importance of relevance and reliability of the information they capture, process and report to others
• Increased confidence when working with colleagues in other departments, with joint venture partners and with government agencies
• A motivation to promote continuous improvement in departmental and company performance

Personal Impact

Participants attending this course will:

• Learn how E&P companies account for activities carried out within Joint Ventures and Production Sharing Contracts (PSCs).
• Be able to make effective decisions on the treatment of E&P financial transactions
• Be able to conduct or manage a wide range of practical E&P accounting tasks such as the calculation of depreciation, the performance of an impairment test, and the making of a provision for decommissioning costs
• Be able to read and understand financial information in the annual reports of their company and of other companies in the E&P industry
• Gain an appreciation of SEC requirements for oil and gas companies to report supplementary information on their E&P activities
• Be better prepared for positions of increased responsibility by developing a management approach to corporate performance and sustainability
  

Competencies Emphasised

• Ability to compare and contrast different accounting policies and practices in common use within the E&P industry
• Application of Generally Accepted Accounting Principles (GAAP) relevant to your company
• Accuracy and consistency in the recording, reporting and analysis of financial transactions across all phases of the field life cycle
• Taking the initiative in developing, implementing and applying measures for the effective management of E&P company financial performance

Training Methodology

Learning in each session of this course is developed and reinforced by:

• Illustrated presentations on industry activities and their related accounting, reporting and measurement issues
• Worked examples, exercises and solutions demonstrating the practical application of each topic
• Illustrative extracts from the annual reports of international companies
• Opportunities for questions and discussion on relevant issues raised by participants

 Seminar Outline

Day 1: Joint Ventures and Production Sharing Contracts

Introduction to the E&P Industry

• Oil and gas reservoirs
• Oil and gas reserves
• The field life cycle

Joint Ventures

• Joint operating agreements
• Cash advances
• Billing statements

Production Sharing Contracts

• Contract terms and conditions
• Cost oil and profit oil
• Cash flow implications
• Reserve implications

Day 2: Accounting for Exploration and Development Costs

Generally Accepted Accounting Principles (GAAP) for E&P

• Company law
• Stock exchange regulations
• International financial reporting standards (IFRS)
• National accounting standards and guidelines

Drilling Costs

• Time, depth and cost
• Well cost reporting

Pre-development Costs

• Licence, geological and geophysical costs
• Exploration and evaluation drilling costs
• Successful efforts and full cost methods
• Cost centres and cash-generating units
• Finding costs per barrel

Development Costs

• Transfer of pre-development costs
• Property, plant and equipment
• Development wells
• Borrowing costs
• Finding and development costs per barrel

Day 3: Production, Depreciation and Impairment

Production Costs

• Operating costs
• Royalties
• Cost of sales
• Production costs per barrel

Depreciation of Oil and Gas Assets

• The unit-of-production (UOP) method
• Matching costs with reserves
• Changes in costs and reserves
• Exceptions to the UOP method

Impairment of Oil and Gas Assets

• Indications of impairment
• Estimating value in use
• Net realisable value
• Accounting for impairment

Day 4: Sales, Acquisitions, Disposals and Decommissioning

Sales Revenues

• Revenue recognition
• Long-term gas contracts
• Entitlements and liftings
• Shared pipelines and tariffs

Mergers, Acquisitions and Disposals

• Business combinations
• Purchases and sales of oil and gas interests
• Farm outs
• Carried interests

Commitments, Contingent Liabilities and Provisions

• Recognition and reporting
• E&P company disclosures

Decommissioning, Removal and Restoration

• Costs requiring provision
• Measuring the amount of provision
• Accounting for removal and restoration costs
• Cash flow implications

Day 5: Supplementary Disclosures and Corporate Sustainability

Supplementary Disclosures

• Return on capital employed
• Total shareholder return
• SEC filings

Corporate Sustainability

• Properties held for exploration
• Exploration success rates
• Reserve replacement and growth
• Oil price and profitability
• Margin and net income per barrel
• Capital investment maintenance