Course details

Overview ?

INTRODUCTION

This programme will provide you with a solid foundation in the financial aspects of oil and gas exploration and production (E&P). It will have immediate and practical application back at your workplace since all activities have financial implications for the assets, departments and ultimately the company for which you conduct your specialist activities. This five-day programme has been designed specifically for non-finance specialists in the oil and gas industries who need to understand the financial implications of the work they do.

You will learn how to:

Understand how your activities and decisions are reflected in your company’s reporting to shareholders and other stakeholders
Find out what happens to financial and economic data that is provided by you and your departmental colleagues
Raise your level of confidence in working with financial information and interactions with commercial colleagues
Prepare yourself for increased responsibility and a more strategic role in the management of your company

PROGRAMME OBJECTIVES

appreciate the financial impact of your day-to-day decisions and actions
work more confidently and effectively with colleagues on financial matters
improve the quality of information you receive from and provide to Finance
increase the success rate of requests for authorisation of expenditure and make more effective use of funds allocated
use departmental budgets and monthly management reports to help you exercise financial control of your area of operations
understand the financial information disclosed in your company’s annual report and accounts
Learning throughout the programme will be reinforced by case studies, worked examples, and illustrative extracts from oil and gas company annual reports

TRAINING METHODOLOGY

The programme uses training methods chosen to ensure effective learning, to reinforce understanding, to develop practical skills and to promote the critical evaluation of information. Interest is maintained throughout each session using a variety of formats, including:

lively illustrated presentations on the industry context and the 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

PROGRAMME SUMMARY

The programme begins with a review of the business environment and an overview of E&P activities. The rest of

Day 1 is devoted to understanding the economic analysis used in making E&P project decisions.

Day 2 covers the essentials of accounting and financial reporting, including the components of a balance sheet, the measurement of profit and the distinction between capital and operating expenditures. With this foundation, the rest of Day 2 and

Day 3 examine the accounting and reporting treatment of exploration, development and production costs, including the treatment of dry wells, depreciation, tests for impairment of assets and provision for removal and restoration costs (decommissioning).

Day 4 deals with the financial implications of arrangements used to manage the high risks and costs that are characteristic of the E&P industry - joint ventures, farm-outs, carried interests, production sharing contracts and long-term gas contracts.

Day 5 applies the financial accounting and reporting knowledge gained on the programme to the analysis of financial statements, providing an essential framework for assessing the performance of your company and its competitors and for making effective use of the budgets and management reports with which the programme concludes.

PROGRAMME OUTLINE

The E&P Business and Project Economics

The Business Environment

Business objectives
Stakeholders
Corporate governance

The E&P Business

Risk and reward
Commercial arrangements
The field life cycle

Project Economics

Project cash flows
The time value of money
Discounting and the cost of capital
Project economic models
Decision criteria

Accounting, Exploration and Development Costs

The Accounting System

Capturing and recording data
Cash and accruals
The balance sheet
The income statement and profit measurement
Accounting principles and standards

Capital and Operating Expenditure

Matching costs and benefits
Assets and expenses

Exploration and Appraisal Costs

Full cost and successful efforts
Intangible assets

Development costs

Commitments
Tangible assets

Reserves, Production and Cost of Sales

Reserves of Oil & Gas

Classification of reserves
Reserve quantity disclosures

Production Costs

Lifting costs
Maintenance costs
Royalties

Depreciation, Depletion and Amortisation (DD&A)

Unit of Production (UOP) method
Changes in costs and reserves

Ceiling or Impairment Tests

Test requirement and process
Accounting for test results

Decommissioning, Removal and Restoration

Obligations to remove and restore
Reporting of decommissioning liabilities and costs

Risk and Cost Sharing Arrangements

Joint Ventures

Cash calls
Billing statements
Entitlements and liftings

Transfers of interests or risks

Farm outs
Carried interests

Production sharing contracts

Cash flow implications
Reserve implications

Long-term gas contracts

Pricing mechanisms
Take or pay

Financial Analysis, Budgets and Management Reports

Analysis of Financial statements

Profitability, liquidity and solvency
Investment measures

Budgets

Authorisation of expenditure
The budget process

Management reports

Responsibility reporting
Analysis of variances

Day 1

Day 2

Day 3

Day 4

Day 5

Training Methodology

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