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

WHO SHOULD ATTEND?

• The programme is specifically intended for those who have had little or no previous exposure to company finance and accounting

• It is especially relevant to those who have some financial responsibility within their area of activity and those whose career development involves progression

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:

DAY 1 :

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

DAY 2 :

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

DAY 3 :

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

DAY 4 :

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

DAY 5 :

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

Analaysis of variances

-