Exploration & Production Accounting - Level 2

The course is divided into three broad topic headings - as described below.

Financial Accounting

Aims to enhance your knowledge of financial accounting and reporting issues which are unique to the E&P industry. Particular emphasis will be placed on achieving a thorough understanding of various accounting standards that apply to the industry. Comparisons are made between International, UK and USA practice and to other countries. Reference will be made to relevant IFRS, FAS and FRS documents. You will refer to examples from E&P company accounts and see and understand the impact of adopting different accounting policies.

Content

Regulation of oil & gas company accounting
• Appreciating the need for standards, the sources of standards applicable to E&P companies and the underlying principles.

Accounting for Pre-Development Costs
• Understanding policy choices and accounting standards on pre-licence, exploration and appraisal costs.

Commercial Reserves
• Appreciating the nature of commercial reserves and their significance in accounting.

The DD&A Calculation
• Calculating DD&A on a Unit of Production basis.

Dealing with changes in costs and reserve estimates.

Impairment or Ceiling Tests
• Testing for impairment of assets. Comparison of IAS 36, FAS 121, and FRS 11 requirements.

Accounting for Decommissioning
• Accounting policy choices on provisions for decommissioning. Comparison of IAS 37, FAS 143 and FRS12 requirements.

Accounting Disclosures
• E&P company cash flows, standardised measure and other industry-specific accounting disclosures.

Accounting for Financing Arrangements
• Recommended practice on accounting for E&P company financing and risk-sharing arrangements such as Farm In/Farm Out and Carried Interests.

Accounting for Sales Revenue
• Recommended practice on accounting for oil and gas sales. The timing of revenue recognition and matching of costs for under/over liftingof entitlement and take or pay gas sales agreements.

Accounting for E&P Company Taxes
• Introduction to types of E&P taxes. Deferred tax accounting.

Analysis of Financial Performance
• Measuring and analysing E&P company financial performance.

Joint Venture & Production Sharing Accounting

This section of the course aims to enhance your knowledge of joint venture and production sharing accounting issues. Particular emphasis will be placed on understanding the accounting requirements resulting from joint venture (JV) and production sharing. Reference will be made to sample JV and production sharing agreements from different countries and to attempts in the industry to standardise accounting practice, e.g. COPAS, SOAP.

You will be encouraged to challenge traditional methodology in order to develop models of good practice that they can apply back in their workplace.

Content

Joint Venture Agreements
• The JV agreement and its management
• Review of the accounting procedure
• The role of JV audit

Accounting for JV Agreements
• The principles and practice of accounting for JV agreements

JV Cash Management
• Cash calling, invoicing and cash management

JV Billing Arrangements
• How to account for JV billing statements

JV Cost Allocation
• Key issues in allocating JV costs

Unitisation and Redetermination
• How to account for product and cost sharing changes following an equity redetermination

Materials & Inventory Accounting
• Understanding the accounting for material purchases and inventory movements

Production Sharing Contracts
• Understanding the different types of PSC in use around the world
• Risk Service Contracts
• Understanding the differences between a PSC and a Concessionary system
• Calculating government take and company take
• Cost Oil and Profit Oil calculations
• Understanding ‘R' factors and their application
• Product allocations and pricing conventions
• Accounting for carried interests

Accounting for PSCs
• How to account for PSCs
• Understanding some of the key issues of PSC accounting such as double taxation

Budgeting & Cost Control

The final section of the course concentrates on budgeting and cost control and aims to improve your ability to prepare departmental and company wide E&P budgets and to control and analyse the costs incurred within an E&P company. Particular emphasis is placed on understanding the nature of costs that are unique to an E&P company and how these costs behave under different conditions. Realistic examples are provided to encourage you to develop a model of good budgeting and cost control practice that can be applied back in the work place.

The E&P Budgeting section incorporates a team exercise which simulates the preparation of the annual budget of an E&P company.

Content

Financial Planning and Control
• Understanding the context, objectives, principles and processes of financial planning and control

E&P Company Budgeting
• Different approaches to budgeting, including incremental and zero-based
• How to develop a budgeting methodology
• Different kinds of E&P budgets
• How to evaluate the output from budget preparation

Departmental Budgets
• How to prepare a departmental budget

Cost Control
• The nature and behaviour of costs
• How to report, monitor and control costs
• E&P company variance analysis

Performance Measurement
• The Balanced Score Card
• Key Performance Indicators