Production allocation is the process of accurately accounting for the oil, gas, and other products of a well. This production accounting contains the crucial data for the well and is therefore elemental in nearly all aspects of an oil and gas company. To perform this accounting properly and efficiently, it is important that the individual well configuration be considered and a production management system be in place to efficiently capture data. A Production Accountant will have the unique experience necessary to turn this data into meaningful allocation reports for internal stakeholders and ensure that all reporting requirements are met.
Field configuration determines the way to set up an allocation. Some of the allocation methods are well tests, metered, or fixed factor. There can also be a single well allocation where everything produced and sold is allocated to one well. There are many other attributors as well, such as gas lift, buyback, fuel usage equipment, flared or vented gas, etc.
Because drilling and completion techniques have evolved and grown more complex over time, it is important to know which attributes are unique to the individual well’s production as well as the field architecture. These will determine whether to use well tests, metered, or fixed factor allocation. When staging the initial allocation configuration, you must also account for other attributors.
Whether you’re dealing with a new well or a change in an existing well, it’s important to have a good line of communication between the field personnel and the Production Accountant in the back office. It is a good idea for an operator to have a production management system. It’s a great time saver that also leaves less room for error.
PetroLedger’s primary software partners all have applications to capture field data and feed it to the primary accounting software. This reduces time and errors of hand-keyed data and streamlining the process.
Production accounting plays a crucial part in the petroleum industry. Without these allocations, you could lose time on re-reporting and, even worse, lose capital to penalties.
Production accountants are responsible for creating daily and monthly oil, gas, water, NGL, skim, and drip allocations for each well. The accuracy of these allocations is important: company reports and audits use both daily and monthly allocated results. For state/federal reporting and audits, as well as reporting of revenues and royalties, accountants use the monthly allocated production and sales volumes.
When it’s time for monthly allocations, the Production Accountant will compare the run tickets and lact meter volumes in the production management system with statements from the oil and gas purchasers. Gas meter volumes data will also be compared to the received gas volume statements (Mcf and MMBtu). Once the purchaser statement volumes are reconciled and the allocations have been run and approved, the state and federal reports can be run and submitted.
Should an operator have an acquisition, the Production Accountant is responsible for getting the new wells, CPs, and central tank battery (CTB) set up in the production allocation system. They will also ensure that the allocated data is correct. Time will be spent communicating with the field and the company selling their properties to make the process seamless. The same goes for if the operator decides to sell properties of its own. The Production Accountant will spend time working with the buyers until setup is complete and functioning properly in their system.
If a company decides to implement a new production management system, they should be sure to involve a production accountant. There is a lot of training and data conversion that comes with a system implementation. Your Production Accountant will confirm that all information has been set up and that the allocations are running properly.
It is crucial to have a skilled Production Accountant who understands the daily/monthly routines and deadlines. They will have to adjust to changes that may happen in the field or within agency rules and regulations. It can be difficult to find someone qualified to manage this critical aspect of an operation’s infrastructure. To learn more about Production Accounting and how it can help you with your reporting, check out our full whitepaper.
PetroLedger Financial Services has a team of professionals dedicated to production accounting and can ensure your allocations are accurate and your reporting is on time. Contact our Sales Team for more information on how PetroLedger can serve your production accounting needs.
Lainie recently joined PetroLedger in January 2022 as a Production Accountant after 25 years in the oil and gas industry. After spending a couple of years as a receptionist, she decided she needed a change in career, and became a Production Assistant for an oil and gas company. She grew to love the industry, and, since then, she has spent 25 years as a Production Accountant.
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