Oil and Gas for Accountants and Auditors
This course covers upstream and midstream operational and commercial topics with a tie-in to accounting, joint operations, financial reporting and internal controls. This course will immensely boost the ability of inexperienced auditors to competently interact with auditees. It will also give financial accountants and tax accountants an improved perspective on the sources and uses of the accounting data flow.
Course Agenda
Timing: 8:00 AM -4:00 PM with 45 minutes for lunch (both days).
- View example oil and gas company financial statements
- Highlight line items important to oil and gas
- Description of how course content will address oil and gas line items
- Production types and characteristics
- Gas types, wet/dry gas, condensate, NGL and market uses
- Oil types, gravity, sulfur, refined products and market uses (examine oil sample)
- Oil, gas and NGL measurement and pricing units
- Sectors of the industry
- Industry participants
- World oil and gas markets
- Liquefied natural gas (LNG)
- U.S. unconventional activities
- Questions using electronic response cards
- Oil and gas formation, migration and traps
- Conventional vs. unconventional development
- Geological and geophysical methods/tools used by geoscientists
- More on seismic acquisition
- Exploration decision factors
- Accounting treatment of exploration-related costs (successful efforts and full cost)
- Questions using electronic response cards
- Ownership of oil and gas rights in U.S. vs. rest of world
- U.S. land survey systems and relevance to oil and gas
- U.S. ownership distribution (private, federal, state, Indian and private)
- Severance of mineral rights from surface rights
- Ownership of oil and gas production (Rule of Capture)
- State regulatory agencies and conservation laws
- Vertical and horizontal well spacing examples
- Elements of an oil and gas lease
- Royalty payments and statements
- Severance/production taxes and other royalty cost deductions
- Joint ownership and net mineral acres
- Pooling and unitization (voluntary and compulsory)
- Net revenue interest
- Title opinions and division orders
- How the division order database is used by multiple organizational functions
- Brief overview of federal leasing
- Mention of other types of interests (NPRI, ORI, NPI, carried interests, farmouts)
- Common elements of international contracts
- Accounting treatment of leasing and unproved property acquisition costs
- Questions using electronic response cards
- Well planning
- Wellsite preparation and rig mobilization
- Video segments (with downhole animations) explaining the structure and functions of a drilling rig and showing the step-by-step drilling of a horizontal well
- Video and animations showing hydraulic fracturing
- Well completion (flowback, tubing, packer and christmas tree)
- Advanced methods (micro-seismic, batch drilling, rig skidding/walking, and zipper fracs)
- Brief overview of offshore drilling
- Key drilling costs and tangible vs. intangible
- Accounting treatment of drilling costs
- Questions using electronic response cards
- Optional instead of questions: Interactive exercise if group size is between 20-30
- Reservoir characteristics
- Exploration and development economics
- Post-drilling costs required to complete a well and establish production
- Well evaluation tools (wireline logs, production tests and well cores)
- Modeling, simulation and development considerations
- Conventional reservoir drive
- Artificial lift
- Example production site layout
- Production processing facilities
- Digital oilfield – data capture and SCADA
- Example oil and gas production flow from wellhead to market
- Comingling and well tests
- Depletion stages and enhanced recovery
- Well workovers
- Offshore production and platforms
- Common types of production cost
- Treatment of production costs and expensed vs. capitalized items
- Oil and gas reserves
- Capitalized costs, DD&A and impairment review
- Overview of supplemental oil and gas disclosures
- Reserves disclosure
- Results of operations
- Development and exploration activities
- Costs incurred
- Capitalized costs
- Standard measure of discounted future net cash flows
- Asset retirement obligation (abandonment)
- Questions using electronic response cards
- Reasons for joint operations
- Model-form joint operating agreements
- Review of key provisions in the AAPL model form JOA (Copy of model form JOA included)
- Operator duties, partner approvals and AFEs
- JOA accounting procedure (Copy of COPAS model form accounting procedure included)
- Direct costs and operator overheads
- Joint interest bills (JIBs)
- JV auditing process
- Unitization for conventional projects (such as a waterflood)
- Net consolidated statements vs. gross field-level reports
- Questions using electronic response cards
- Gas composition
- Pipeline quality standards
- Gas processing (animated tour of a gas processing plant)
- Value of NGL components
- Gas gathering and processing contracts
- Example plant statement
- Fractionators
- Questions using electronic response cards
- Oil measurement
- Standard volume conditions (60°F net of BS&W)
- Gravity and gravity adjustment to standard temperature
- Tank sale method using strapping table
- Tank sale procedures (demo using thief, thermometer, plumb bob and gauging tape)
- Sample gravity and BS&W analysis (demo using thermohydrometer)
- Run ticket and volume calculation
- LACT meter sale method and meter ticket
- Gas measurement
- Standard volume conditions (60°F)
- Information needed for gas measurement
- Orifice meters and measurement method
- Gas sampling and Btu value
- Transportation
- Example of production-to-market infrastructure
- Oil and gas transportation methods
- Pipeline transportation arrangements
- North American crude oil pipeline network
- Cushing and WTI
- U.S. gas pipeline network and Henry Hub
- Locations of gas processing plants and storage facilities
- Oil Marketing
- Market participants
- World crude oil sources and characteristics
- Spot markets, posted prices and futures markets
- Use of pricing benchmarks and differentials
- Brief discussion of hedging and speculation
- Gas marketing
- Market participants
- Spot and futures markets
- Bid week and transaction terms
- Questions using electronic response cards
- Overview of Production and Revenue Accounting
- Sources of information
- Net revenue interest
- Matching production with price
- Accruals for information lags
- Royalties and post-production costs
- Overview of regulatory reporting
- API well numbers
- Production vs. sales
- Allocation of production to individual wells
- Questions using electronic response cards
- Course evaluations: copies of all evaluations provided to company