There is nothing common about producing and selling natural gas. E&P teams are finding molecules thousands of feet below the Earth’s surface, lifting them out of the ground and selling what comes out to an end-market buyer yielding the best price. Also, adding to that complexity, a list of investors (working interest owners, royalty owners, overrides, etc.) own the volumes produced. Each of these owners are entitled to their share in the benefit of the produced volumes and may or may not share in the expenses. But some interest owners will find end market values different than other owners of the same gas from a well.
So how does one correct inconsistency among investors? Gas balancing is required to correct the disconnect that occurs between joint owners in development projects. If you’re unsure about needing to transition to production accounting services, here are some common questions answered by our experts.
Various scenarios can cause a discrepancy in the accounting of sales of produced hydrocarbons. Thus, a few common reasons for getting out of balance include:
If an Operator is out of balance based on actual physical volume discrepancies, they can get back in balance in two ways. Firstly, they can make a cash settlement based on the historical out-of balance volumes times a weighted average sale price. The second way is via a True Up, where future production volumes get the accounts back to level.
Documenting a working interest owner on actual sales volumes requires revenue and accounting teams to book all sales volumes and values. This also includes any adjustments. This allows the operator to only book true sales without having entries on the books for overdelivered or underdelivered volumes. An Operator following entitlements books volumes and revenues strictly based on their ownership decimal. Any imbalance is then booked to a separate imbalance account, which is defined as a receivable or payable with the imbalance tracked monthly.
At PetroLedger, we use our oil and gas accounting expertise to help simplify and optimize accounting needs for natural gas producers, processing plants, and pipelines. Interested in learning more? Contact us today!
The journey from old to new oil and gas software can be an arduous one. On top of the complications that can arise during the data conversion process, many companies come to realize post-conversion that their new software may not be as good of a fit as they believed. But data conversions are costly, time-consuming projects; you really want to get these right the first time. With over 25 years of experience migrating client data, we’ll be there to help you make the decision that’s best for your business, whether your data comes from industry-standard applications, QuickBooks, legacy software, or any other unsupported systems. Our scoping process is thorough, and we’ll recommend the application we think is the best for you after some conversation about your needs. But before you decide to pull the trigger on a data conversion, here are three important questions your company should consider.
Nothing is scarier during Halloween season than knowing your 1099 filing deadlines are creeping closer. We know how much of an enormous headache the 1099 filing process is— that’s why it’s one of our most-requested services we offer to our clients. But there’s no need to stress this year: here is how outsourcing your 1099 processing can help you relax this season.
An inaccurate division order can spell a lot of trouble for all parties involved. Mispayments are not always detected expeditiously, and they can often create practical and legal challenges if they are not resolved quickly. However, the unfortunate reality for operators is that, without thorough oversight, inaccuracies are inevitable, especially when you factor in varying division order laws from state to state. These mispayments are usually caused by simple human error: miscalculations, typos, system errors, ownership analysis errors, and so on.
Our vision at PetroLedger is to be the partner of choice within the oil and gas industry for outsourced accounting and transaction services by employing the best-in-class people and processes across multiple technology platforms. Our most experienced and versatile staff resides in our Professional Services department. If you ask any of our staff, they will say it’s very rewarding to see the before and after version of their books. The PetroLedger team is a set of superheroes that transform and correct your data to better serve your organization.