When an oil well starts producing, the revenue rarely goes to just one company.
Instead, it flows through a network of operators, investors, landowners, and partners, each with their own stake in the project. These joint ventures are a cornerstone of oil and gas development in the United States, but managing them requires careful coordination and highly accurate financial reporting.
JOINT VENTURES ARE A CRUCIAL COMPONENT OF OIL AND GAS PRODUCTION IN THE UNITED STATES.
In simplest terms, a joint venture is an agreement among the parties to share the risks (expenses) and rewards (revenues) from the production of hydrocarbons, including private landowners, operators, investors, and others. Joint ventures can be complex, and fulfillment of the terms can be tricky. Often in pursuit of scale, joint ventures may be seeking to develop large tracts of land across multiple leases and potentially across state borders.
In the Permian Basin, operators are drilling multiple vertical wellbores at different depths in a spider web of directions from a single pad site on the surface.
Accurate ownership information and the need for defined allocation methods are critical, but keeping tabs on expenses, production, and revenue for the participating parties for each project can be difficult.
How To Keep Track of it All
Tracking every penny from the well to each owner requires an accounting team who knows the ins and outs of finances in the oil and gas industry.
Operators who accurately track and report costs and review reconciliations, vendors, billing, and overhead are better able to instill confidence in their joint venture partners. Plus, accurate and timely accounting practices lower the risk of failing an audit, whether it's internally or externally driven. In addition, it is good business practice for non-operators to understand the rights and responsibilities outlined in the Joint Operating Agreement to assess how the operators are performing and assure their investments are treated equitably.
We Are Here to Help
Enter our team at PetroLedger. We are highly skilled and have decades of experience in managing this process, from receiving expenses and coding them in accordance with the JOA to managing complex marketing arrangements for revenue processing and understanding the assignability of wells and owners. Our clients range from non-operators and single-well operators to thousand-well operations with an investor deck in the tens of thousands. Rest assured: we’ve seen it all.
Whether you are looking for expert monthly processing, internal review, or external joint venture audit services, PetroLedger can help you set your accounting on the right path, improving confidence and avoiding a contentious relationship between operators and non-operator investors. Want to learn more? Give us a call!
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