Advanced Oil & Gas Accounting; International Petroleum Accounting (1)
ObjectivesBy the conclusion of the specified learning and development activities, delegates will be able to:
1. Demonstrate a heightened understanding of the differing levels of Financial Reporting Regulation and Standardization, as they apply to Oil and Gas Accounting;
2. Demonstrate a heightened understanding of salient accounting concepts and governance
3. Demonstrate a heightened understanding of the differing levels of regulation and standardization applied to Oil and Gas accounting;
4. Deconstruct the role of finance and accounting in an Oil and Gas Organisation;
5. Exhibit a heightened understanding of the requirements of International Financial Reporting Standards;
6. Demonstrate a heightened ability to analyse their company’s performance, as an oil and gas player or regulator;
7. Demonstrate their ability to determine the extent to which financial measurement techniques such as full cost, successful efforts and reserve recognition can be used to evaluate oil and gas producing operations;
8. Exhibit their ability to utilise Advanced Financial Measurement Techniques such as full cost, successful efforts and reserve recognition are used to evaluate oil and gas producing operations;
9. Exhibit their ability to manage risk effectively in oil and gas project contracts, averting pitfalls of key contractual clauses;
10. Demonstrate the most appropriate contract formulation for Take-or-pay thresholds, accounting, transportation agreements, tariffs, reserving pipeline capacity, respectively;
11. Determine the roles and interplay of the Governments of territories containing hydrocarbon reserves, National Oil Companies, International Oil Companies, the Major Product Suppliers, the Engineering & Contracting Companies and the Service Companies,
12. Suggest the principal standard form contracts used in the industry including the North Sea LOGIC/CRINE standard form contracts and the Association of Independent Petroleum Negotiators (AIPN) standard form contracts;
13. Explain the international dispute resolution framework and institutions in the context of expert decisions, mediation arbitration and litigation.
Practical experienceUse of Video Cases; Written Cases; Simulations and Industrial Visits.
Entry requirements1st Degree or Equivalent Qualification
Academic titleDiploma - Postgraduate in Advanced Oil & Gas Accounting: International Petroleum Accounting (1)
Course description
Day 1 – Accounting Concepts and Governance
General Contents, Concepts and Issues
Accounting Concepts
1. The money measurement concept
2. The entity concept
3. The going concern concept
4. The dual aspect concept
5. The accounting period concept
6. Materiality (Proportionality) concept
7. The conservatism concept
8. Consistency concept
9. The realization concept
10. The matching concept
11. The cost concept
Financial Governance and Standardization Institutions
1. Financial Accounting Standard Board (FASB)
2. The Security and Exchange Commission (SEC).
3. Accounting Standards Board (ASB)
4. International Accounting Standards Committee (IASC)
5. International Accounting Standards Committee Foundation (IASCF)
6. International Financial Reporting Standards (IFRS)
7. Industry Specific Oil and Gas Accounting Standards
8. Generally Acceptable Accounting Principles (GAAP) for Oil and Gas Producing Activities
9. Oil Industry Accounting Committee (OIAC)
Day 2 – DRILLING DEVELOPMENT COSTS – SUCCESSFUL EFFORTS
Income tax accounting for drilling costs
IDC vs. Equipment
Intangible Drilling Costs (IDC)
(1) Up to an including the installation of Christmas Tree
Prior to Drilling
· G & G
· Preparation of Site
. During Drilling
· Drilling contractor’s charges
· Drilling mud, chemicals, cement, supplies
· Fuel
· Wages
· Well testing
At Target depth and during completion
· Well testing
· Perforating and cementing
· Swabbing, acidizing and fracturing
· Labour related to the installation of subsurface equipment
· Plugging and abandoning cost – for dry wells
(2) After Christmas tree – following completion
Removal of Drilling Rig
Restoration of land and damages paid to surface owner
(3) Wells other than Exploration and development Wells
· Intangible costs for extending well (see lists 1 & 2, above)
· Intangible costs incurred in drilling water supply and injection wells
· Intangible costs incurred in drilling water and injection – where water well is being used to for exploration and development well or for injection.
Financial accounting for drilling and development costs
Well classification
Exploratory well
Service well
Stratigraphic test well
Proved developed oil and gas reserves
Proved undeveloped reserves
Successful Efforts, exploration costs
Exploratory drilling costs
Development drilling costs
Stratigraphic test wells
AFE’s and drilling contracts
Special drilling operations and problems
(1) Workovers
(2) Damaged or lost equipment and materials
(3) Fishing and side tracking
(4) Abandonment of portions of wells
Additional development costs
(1) Development costs
Costs of gaining access and preparing well location for drilling
Costs of drill and equip development well, development-type Stratigraphic test well
Cost of acquiring , constructing and installing production facilities, e.g. lease
Support equipment and facilities
Drilling and development seismic
Post-balance sheet events
Accounting for suspended well costs
Interest capitalization
Offshore and international operations
Problems
And Issues associated with Successful Efforts Accounting for Drilling Development Costs
Day 3 – PROVED PROPERTY COST DISPOSITION – SUCCESSFUL EFFORTS
Costs of Property
Cost of lease and well equipment
Cost disposition through amortization
Reserves owned or entitled to
DD&A calculation
DD&A on a field-wide basis
DD&A when oil and gas reserve are produced jointly
Estimated future dismantlement, site restoration, and abandonment costs
Exclusion of costs or reserves
Depreciation of support equipment and facilities
Cost disposition – nonworking interests
Revision of DD&A rates
Cost disposition through abandonment or retirement of proved property
Successful efforts impairment
Problems
Day 4 – FULL COST ACCOUNTING
Principles of Full Cost Oil and Gas Accounting
Disposition of capitalized costs
Inclusion of estimated future development expenditures
Inclusion of estimated future decommissioning costs
Exclusions of costs
Impairment of unproved properties costs
Abandonment of properties
Reclassification of properties
Support equipment and facilities
DDA&A under successful efforts versus full cost
Reserves in place – purchase
Interest capitalization
Limitation on capitalized costs – a ceiling
Asset retirement obligations
Deferred taxes
Income tax effects
Assessment of the ceiling test
SFAS No. 144 and Full Cost Ceiling Cost
Post-balance sheet events and the ceiling test
Problems and Issues associated with Full Cost Accounting
Day 5 – ACCOUNTING FOR PRODUCTION ACTIVITIES (1)
Accounting treatment
Cost of production versus inventory
Recognition of inventories
Lower-of-cost-or-market valuation
Accumulation and allocation of costs
Individual production costs
Secondary and Tertiary recovery
Gathering systems
Saltwater disposal systems
Tubular goods
Severance taxes
Day 6 – ACCOUNTING FOR PRODUCTION ACTIVITIES (2)
Production cost statements
Joint interest operations
Decision to complete a well
Project analysis and investment decision making
Payback method
Accounting rate of return
Net present value method
Internal rate of return
Profitability index
Problems and Issues associated with Accounting For Production Activities