Exploration and Production Accounting - Level 3

Company Start-up

• Setting up a company
• Becoming a non-operating partner in new joint ventures
• Select accounting policies for exploration activities
• Billing statements and accounting for the share of the gross costs  

Participants will select accounting policies appropriate for a small independent Exploration and Production (E&P) company and then apply these policies in accounting for the first ventures in which the new company becomes a partner. The Board of Directors for the company will decide to acquire a producing asset and participants will be required to analyze and evaluate economic data for a number of potential acquisition targets, then determine which of the available options they wish to acquire.

Accounting for Production and Development Activities

• Acquire and account for a producing asset
• Select and define accounting policies for development and production operations
• Account for a farm out
• Perform calculations for depreciation and establishing a decommissioning liability
• Accounting requirements as an operator 

The second day of the program will see the company move into the production phase. Participants will also progress to a development on one of the first ventures.  Participants will work in their teams to consider accounting alternatives, agree on the optimum choices, and define their accounting policies for these new activities. Participants will then calculate depreciation charges and establish a decommissioning provision.

Converting from Full Cost Method to Successful Efforts Method

• Accounting for a carried interest
• Revenue accounting and dealing with an underlift and overlift
• Unitization of a field and the accounting implications that arise
• Prepare and analyze financial statements as a full cost accounting company
• Change accounting policies to convert to the Successful Efforts Method  

Participants will learn about carried interests.  As one of the development opportunities extends into the adjacent license block participants enter into a unitization agreement and will be required to consider the implications of this and account for the corporate accounts.  As the company grows, participants will discuss and agree to the changes required of the accounting policies to adopt the Successful Efforts Method in accounting for exploration and appraisal costs.

Accounting for a Production Sharing Contract (PSCs)

• Acquisition of a producing asset
• PSCs and how they function
• Accounting for changes in the cost and timing of decommissioning
• Accounting for a redetermination 

Participants will learn the implications of working in a Production Sharing Contract (PSC) and will have to model the contract terms under which the PSC was awarded in order to calculate the number of barrels of oil that the company will be entitled. Participants will have to consider how to deal with a change in the cost and timing of decommissioning and how this should be reflected in the company’s books.  Participants will also account for a redetermination of the unitized field.

Impairment Testing and Analysis and Presentation of the Company’s Performance

• Carrying out an impairment test
• Preparation of final financial accounts
• Analysis of the company’s performance
• Preparation and delivery of a presentation to investment analysts 

The final section of the training program requires participants to carry out an impairment test on one of the company’s assets. The participants will prepare final accounts and will then analyze the accounts to assess and evaluate the company’s performance. Each team will be asked to prepare and deliver a presentation to investment analysts that will highlight the company’s achievements and significant milestones in its past and to propose a future strategy for the growth and development of the company.