Solution in detail oil and gas hydrocarbon accounting for oil and gas

Solution in Detail

© 2013 SAP AG or an SAP affiliate company. All rights reserved.

Oil and Gas

Hydrocarbon Accounting for Oil and Gas

Executive Summary Solution Overview Contact Us


2 / 23 © 2013 SAP AG or an SAP affiliate company.

All rights reserved.

Streamlining Hydrocarbon Accounting

Financial reporting organizations, regulatory

agencies, and royalty owners are demanding

more information from oil and gas producers.

The desire for more information is coming from

everywhere – and the ability to audit data

integrity is ever-increasing.

These challenges require oil and gas

companies to provide well-level hydrocarbon

accounting within contractual requirements.

These demands on oil and gas companies

require processes for every hydrocarbon

transaction. This gives a multitude of stake-

holders the sustainable and transparent

information they need – and want.

Of decision makers think that

access to the right information

at the right time is critical to

their business

Source: SAP Performance

Benchmarking

It can be challenging to maintain accurate records of expenditures and revenues

for partners and royalty owners. By streamlining hydrocarbon accounting

processes, oil and gas companies can gain the visibility they need to accomplish

this task. Enhanced Visibility

Refined Hydrocarbon

Accounting

SAP Innovations

A Source for Transparency


80%

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SAP software for production revenue accounting

helps integrate business processes, from field

measurement recognition to royalty owner

disbursement. The software can be scaled to

cover a network ranging from a single well to

1,000 units.

Integrated marketing and ownership processes

can reduce the amount of accounting master

data.

The ability to handle processed and unprocessed

gas enables accountants to perform dual cal-

culations and maximize royalty payments. The

pricing component allows for fixed or indexed

pricing to accommodate greater flexibility when

negotiating contracts.

Allowable tax abatements for special circum-

stances are date effective, resulting in less

master data work. The software also provides

transparency into value calculations, tax

incentives, royalty abatements, and settlement

diversity of owners.

Joint venture accounting is a core function of

the SAP ERP Financials solution. It provides

the transparency needed to accommodate

partner billings, cash calls, and payout functions.

Accounting with Better Visibility

Improve cost transparency, production measurement and allocation, and revenue

distribution for a faster, more accurate financial close. By maintaining accurate

accounting records and distribution, companies can comply with contractual

agreements and royalty reporting requirements.


Best-Run Oil and Gas

Enhanced Visibility

Refined Hydrocarbon

Accounting

SAP Innovations


http://www.youtube.com/watch?v=dWflHkw_aqA



SAP software can enhance visibility into production and allocation data, reconcile

venture accounting, and support legal and regulatory compliance. With improved

insight into cost, production measurement and allocation, and cash management,

the financial close can become more accurate and faster. In addition, companies

can better comply with production-sharing and revenue agreements, royalty

reporting requirements, and timely invoice-handling.

Gaining Transparency with One Source

Integrate processes, from production volumes to royalty distribution

Reduce rework associated with erroneous or incomplete data

Automate prior period-adjustment processing for faster transactions

Gain real-time financial visibility through integration of financial and cost controlling modules Outstanding product

receivables decrease when

sales metrics can be analyzed

in various ways


Benchmarking


Enhanced Visibility

Refined Hydrocarbon

Accounting

SAP Innovations





Database and technology solutions,

powered by the SAP HANA platform, help

upstream oil and gas producers manage

and process high volumes of accounting

data faster. With higher transactional speed,

companies can streamline and optimize

process execution and satisfy the needs

of their employees.

Analytic solutions offer deeper analysis and

understanding of transactional patterns –

driving streamlined analysis and smarter cost-

management decisions.

Mobile solutions keep personnel in touch with

critical corporate information at all times. This

helps reduce effort when employees are facing

critical deadlines and are waiting for internal

systems to finish and confirm results.

SAP Innovations

With SAP software, hydrocarbon producers can determine the actual amount

of hydrocarbons sold, separate working interest from royalty interest, calculate

tax burdens, and disburse payments. They can also reprocess closed period-

accounting data when changes in measurements or ownership changes occur.


Enhanced Visibility

Refined Hydrocarbon

Accounting

SAP Innovations




Streamlined Accounting Processes

Revenue

Determine contract quantities of hydrocarbons sold within a given period. Split

volumes between working and royalty owner interest, before calculating tax burdens

and disbursing payment obligations.

Land and Lease

Manage land and lease assets for greater profitability. Integrate financials with

core enterprise resource planning (ERP) functions.

Joint Venture Accounting

Improve joint venture partner relationships through traceable billings, cash calls,

and reconciled partnership accounts.

Authorization for Expenditures (AFE) and Assets

Enhance oversight over capital projects and transparency into cost collection on

a project and category basis.

Solution Overview


Why SAP?

Digital Oilfield Operations

Revenue

Joint Venture

Land and Lease

AFE and Asset Management



Oil and Gas Process Map


Solution Overview

Why SAP?


Revenue

Joint Venture

Land and Lease


Reporting

Operations

Accounting

AFE and Asset

Management Revenue Joint Venture Land and Lease

Project

Management

Land

Management

Venture-

Related

Procurement

Field Data

Capture

Project Cost

Settlement

Compliance

Reporting

Owner

Reporting

Project

Accounting

Exploration

Lease

Accounting

Manage

Equity

Group

Cost

Capturing

and Splitting

Partner

Billing

PSC*

Accounting

Venture Partner

Management for Billing

and Cash Call

Volumetric Allocation

and Valuation

DOI and

Owner

Entitlements

Tax

Calculations

Revenue Distribution

Reporting Reporting

Billing

Documents

and Audit

Reports

PSC*

Reports

* Production Sharing Contract



With SAP software, hydrocarbon producers can

quantify revenue accounting data to determine

the actual amount of hydrocarbons sold,

separate working interest from royalty interest,

calculate tax burdens, and disburse payments.

Integration with compliance reporting functions

helps ensure that obligations for transparent,

compliant reporting are met. Producers can

even automatically reprocess closed account-

ing data when hydrocarbon measurements or

ownership changes occur.

As a result, royalty payments are calculated

and paid faster and more accurately, in

accordance with legal and regulatory

requirements.

Determine revenue quantities

and owner-level values for

hydrocarbons sold. Adhere to gas-

balancing provisions by tracking

producer overages and shortages

and providing compliant reporting

by agreement.

Revenue

80% Of decision makers think that

access to the right information

at the right time is critical to

their business


Benchmarking

Capabilities

Revenue

Benefits

Solution Overview





SAP software for contractual allocation helps

determine overage and shortage positions

when producers take products in kind. It

maintains acceptable tolerance ranges for

pipeline measurements against field

measurements.

Valuation and revenue distribution enables

flexible pricing of contract volumes for the

purpose of revenue valuation for all owners on

the property division of interest. Contract cross-

referencing with well completions and divisions

of interest provides the controls necessary for

accurate accounting.

Comprehensive master data functionalities help

minimize severance tax liability by enabling

severance tax abatements offered by taxing

authorities.

This integrated approach pushes accounting

results to reporting systems, where trans-

actional processing occurs for regulatory

compliance. Reporting integration maintains

specific master data to convert from objects

in SAP software to agency objects and

terminology.

This function generates compliant reporting

with processed data.

Increase the Accuracy of Period Data


Capabilities

Revenue

Benefits

Solution Overview



Complete integration – from production net-

work modeling and measurements to revenue

recognition, compliance, and owner reporting –

enables full clarity regardless of where a user

views the data in the process. Validating

transactional data at the time of entry and

cascading data across multiple processes

enables consistent, transparent results.

With frequent changes to measured quantities

of natural gas and ownership revisions,

automated processes for handling prior-period

adjustments allows quick revisions.

The ability to process transactions in trial mode

allows revenue accountants to review potential

results. Then, they can determine whether the

information is correct and ready to be posted or

if further investigation is necessary.

Integrated processes give users confidence

that final reporting is consistent, and frees up

their time by not having to reconcile independent

work processed from data passing between

siloed processes.

Support a comprehensive, collaborative

process to respond to changes in

measurements, prices, tax rates, or

ownership. This enables hydrocarbon

accountants to focus on results, instead

of data entry.

Better Insight into Accounting Results


Capabilities

Revenue

Benefits

Solution Overview



By connecting land management processes

with exploration processes, producers gain

improved visibility into their land and lease

contracts.

That enables land and lease managers to keep

track of lease renewal dates, maintain producing

properties, and work with explorers to help

ensure on-time lease payments and renewals.

This can extend new opportunities for mineral

ownership and rights of way needed for explo-

ration and development activities. Integration

with financial transactions of ERP helps ensure

that assets are properly accounted.

Oversee land and lease assets for

greater profitability, where all financial

implications are integrated with core

ERP functionalities.

Land and Lease

Capabilities

Land and Lease

Benefits

Solution Overview




Integrating third-party land and lease manage-

ment software with SAP software for production-

revenue joint-venture accounting and core

financials enables all lines of business to share

transactional data. This helps ensure that

financial activities across process boundaries

are connected and transparent.

Sharing of vendor master files across solutions

minimizes the amount of maintenance required

for name and address changes and 1099

reporting.

Capturing and recording leases can help

enhance management of undeveloped acreage,

right-of-way, and farm-outs and farm-ins.

Viewing, analyzing, and reporting lease rental

obligations can help land managers determine

whether to continue a lease through a rental

payment or terminate contractual rights.

Connectivity to geographic information systems

(GIS) enables visualization of undeveloped

land positions on maps.

Manage Access to Exploration Acreage


Capabilities

Land and Lease

Benefits

Solution Overview



Integration of land-lease systems with SAP

software provides greater visibility into

exploration opportunities enterprise-wide.

It also helps ensure that information across

work processes is not duplicated – leading to

consistent, transparent data for more informed

decision making.

Land-lease connectivity with producing venture

system enhances transparency into the last

well in all lease situations. With GIS integration,

lease managers can even overlay contract

boundaries on maps.

Sharing owner master data helps reduce the

cost of name and address changes, as well as

1099 annual reporting on rental and royalty

payments.

Manage a comprehensive, collaborative

process for managing the acquisition

and maintenance of land leases and

right of ways. Integrate core financials

in SAP software to properly account for

these activities.

Improved Insight into Unexplored Assets

14% Lower IT spend in the

business units that have

incentives aligned with the

adoption of standard and

common solutions


Benchmarking


Capabilities

Land and Lease

Benefits

Solution Overview




Integrating finance, controlling, project system,

plant maintenance, and materials management

can help accountants accept transactions for

billing purposes as defined by a joint venture

partnership agreement.

With flexibility in events that initiate billing,

operators can issue partnership cash calls

based on pending venture expenditures.

They can also produce partner billings with

the receipt or invoice date of the goods or

service received. And by maintaining different

ownership percentages throughout the lifecycle

of a venture, nonconsent situations are easily

managed. Also, the operator has the flexibility

to recover overhead reimbursements and

burden reimbursements.

Access ownership details for settlement

of owner costs throughout the lifecycle

of a venture. Accommodate partner

election to go nonconsent and provide

for payback-period calculations.

Joint Venture Accounting

76% Higher margins, where

the finance system gives

historical and future views

into financial and operational

performance


Benchmarking

Capabilities

Joint Venture

Benefits

Solution Overview





Joint venture accounting enables an operator

to manage ownership percentages of joint

ventures throughout the lifecycle of activities.

Features of the software facilitate ownership

changes associated with business events,

such as nonconsent clauses and before and

after casing point elections. With effective-

date divisions of interest, handling ownership

changes are no longer a problem for

accountants.

Through defined billing processes, the operator

can determine whether to bill partners on a

detail or summary basis by account.

When needed, the operator can cash-call

joint venture partners for future expected

expenditures in accordance with the terms

of the joint venture agreement.

Through various types of overhead recoveries

prescribed by industry accounting procedures,

the operator can recover administrative cost

throughout the lifecycle of its joint venture

activities.

SAP software enables all this and supports

industry-standard JADE reporting typically used

by joint venture auditors.

22% Lower audit costs where

organizations use automated,

instead of than manual

controls


Benchmarking

Manage Joint Venture Partnerships


Capabilities

Joint Venture

Benefits

Solution Overview




Integrating joint venture accounting with

business transactions reduces exposure to

incomplete partner billings. When activated,

joint venture accounting interacts with accounts

payable, material movements, and AFE

processes to initiate joint venture determination

at the time of the initial transaction.

Joint venture accounting enables accountants

to close financial books faster with a more

accurate reflection of the financial activities

of the period. In addition, transactions from

core ERP and processing becomes more

transparent and timely.

Transactions can be facilitated across multiple

processes relevant to joint venture accounting,

based on cost-center relationships and

divisions of interest.

The ability to maintain different types of divi-

sions of interest across the complete lifecycle

of an asset provides flexibility and better work

processes.

Bring together partner transactions

from materials management, project

system, controlling, and accounts

payable.

Shared Master Data and Integration

with Core Financials

>100 Number of oil and gas

companies worldwide that use

joint venture accounting

software from SAP


Benchmarking


Capabilities

Joint Venture

Benefits

Solution Overview




Visibility into project cost and activities

accelerates reconciliation of cost variances

against budget.

Categorizing activities facilitates generation

of business process-specific authorizations

for expenditures – lowering the overall cost

of managing multiple projects.

Streamlining authorization approvals lowers

the overall cost of managing capital projects.

And tight integration with asset accounting

processes gives financial areas the ability to

close projects quickly and accurately.

Improve oversight over multiple capital

projects and provide transparency into

cost collection on a project and category

basis. This can be done to generate

reporting for internal stakeholder and

partners in accordance with joint

venture accounting procedure.


7% Lower variance between

budget and actual cost where

asset management goals,

objectives, and metrics are

aligned with business metrics


Benchmarking

Capabilities


Benefits

Solution Overview





Core ERP tools from SAP software for asset

and portfolio management enables the setup

and maintenance of capital project tracking.

The flexibility of project system functionality

helps companies create templates for various

types of projects by providing consistency

throughout the enterprise.

The software‟s attributes for capturing activities

and cost objects integrates that data with joint

venture accounting. As a result, accountants

can split costs, when appropriate.

Settlement rules for projects are flexible and

allow systematic determination of intermediate

project cost. This provides for systematic

transfer of expenditures, from work-in-progress

accounts to the appropriate asset or expense

for monthly financial accounting.

A comprehensive view of how costs compare

with budgets improves compliance with

reporting requirements mandated by partners. 22% Higher asset productivity

where the lifecycle is

optimized through planning

and utilization


Benchmarking

Monitor Individual Activities


Capabilities


Benefits

Solution Overview




Eliminating siloed modules for project and

financial accounting enables cost-tracking

from the source of expenditures and material

transfer orders. It also reduces enterprise expo-

sure from missed categorization of cost and

inaccurate financial reporting of expenditures.

Efficiency is gained by standardizing project

templates organization-wide, based on types of

capital projects. Monthly clearing of project cost

from work-in-progress accounts to the proper

financial account minimizes the risk of

incomplete closure of project cost at the termi-

nation of a project.

The flexibility of enterprise asset management

for fixed asset accounting supports industry

depreciation, depletion, and amortization require-

ments. This enables fulfillment of external financial

reporting requirements for oil and gas assets.

Statistical entries for production revenue ac-

counting support decrementing hydrocarbon

reserves by generating quantities produces as

part of monthly depletion calculations.

Simplify the AFE process by tightly

integrating capital project cost with

asset management and financial

accounting.

Unification of Asset Accounting

17% Higher asset return when

management is integrated

with inventory, purchasing,

engineering and finance


Benchmarking


Capabilities


Benefits

Solution Overview




Oil and Gas Value Map

SAP solutions address key requirements for integrated digital oilfield

operations.


Solution Overview

Why SAP?


Revenue

Joint Venture

Land and Lease


Data Collection

and Validation

Data

Surveillance

Data

Governance

Production

Network

Modeling

Performance

Analysis

Production

Allocation

Integrated

Planning

Source to Pay

(Operator)

Field

Confirmations

Order to Cash

(Service

Company)

Resource

Scheduling

Revenue AFE and Asset

Management Land and Lease Joint Venture

Field Data

Capture and

Surveillance

Integrated

Planning and

Performance

Analysis

Field Execution

Hydrocarbon

Accounting



Why SAP?

Comprehensive software for the oil and gas industry breaks down information

silos and provides closed-loop views of information. Transparency across the

entire business allows broader access to information and supports quicker

decision making.

Tightly Integrated, End-to-End Business Solutions

SAP offers the most comprehensive portfolio of software solutions for the oil and gas industry

that enables organizations to focus on their key business processes.

Leveraging Key Breakthrough Innovations

SAP software solutions are based on the industry‟s most innovative technology foundation

including the SAP HANA platform, mobile solutions, analytics, and cloud solutions. This enables

businesses to enhance process optimization and efficiency at the lowest possible cost.

Delivery of Value to Oil and Gas Companies for 40 Years

Some of the world„s leading oil and gas companies – big and small – rely on SAP software

and services to enable every aspect of their operations.


Solution Overview

Why SAP?


Revenue

Joint Venture

Land and Lease





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Solution in detail oil and gas hydrocarbon accounting for oil and gas

Business

Transcript of Solution in detail oil and gas hydrocarbon accounting for oil and gas