The Oil and Gas sector's path to investment - Demonstrate Strong Financial Management

In order for Oil & Gas companies to secure funding during these challenging times, investors will be seeking evidence of robust financial management. Utilising best-of-breed financial management system Infor SunSystems can help your business to effectively compete for a share of the limited investment funding pot.

"The energy industry that emerges from the Covid-19 crisis will be significantly different from the one that came before"
World Energy Investment, Flagship Report, May 2020

However, all is not lost. In a recent virtual Oil and Gas Council debate (Small Cap Players have run out of Funding Options), it was reiterated that for those small and mid-cap energy firms with strong financial management - that can demonstrate that the right procedures and controls are in place - funding options are still available.

Strong financial management was also discussed in this McKinsey and Co article:
“A growing number of investors are questioning whether today's oil and gas companies will ever generate acceptable returns. And their role in the energy transition is also uncertain. Oil and gas companies will have to prove that they can master this space. Discipline in finance, capital allocation, risk management, and governance will be critical.
Source: McKinsey and Co – Oil and Gas After COVID 19 

Key to strong financial management is the ability to demonstrate:

  • Transparency across the organisation
  • Strong budgetary controls with a good balance between G&A and asset productivity
  • Financial strategies that fit with multi-country and global governance

1. Developing transparency across your organisation

The Sarbanes-Oxley Act (SOX) of 2002 (a widely-regarded US federal act that ascribes more transparent corporate auditing and accountability) encourages companies to ‘centralise and automate their financial reporting systems'.
The SOX 404 compliance states that better ICFR (Internal Controls over Financial Reporting) include:

- Evaluating controls over period-end financial reporting processes

- Understanding the flow of transactions including IT aspects

- Conclude on the adequacy of control over financial reporting

For investors, gaining control over these systems may prove to them your worth as a flexible, cost-effective and efficient prospect. And being able to provide detailed reports across the organisation will help with both your internal stakeholders, external stakeholders and prospective investors. Progressive TSL recommends Infor's SunSystems with fully integrated Q&A Reporting as the proven best of breed solution for all our upstream Oil & Gas clients. It provides the functionality, transparency and depth of analysis which is now becoming essential for all those operating in what can be complex commercial environments.

2. Maintaining strong budgetary controls

It's crucial to demonstrate to investors that you have a good handle on your CapEx, OpEx and G&A, balancing this with high productivity.

Progressive TSL recommends implementing best of breed finance system Infor SunSystems alongside procurement functionality provided by Infor EAM. Progressive TSL overlay this with a specific Oil & Gas implementation framework to meet the specific needs and regulations of the industry.  

This proven solution delivers the following features: 

  • Raise purchase orders/invoices in Infor EAM that can be checked against the budget held in SunSystems
  • Set up Budget warnings/budget blocking to alert on department overspend
  • Clean and easy G&A analysis
  • Actuals vs forecast reporting and analysis
  • Monitoring costs to CapEx during exploration and in development then, seamlessly moving to a depreciation model once you start gaining reserves.
  • Splice and dice the data to enable a thorough and robust analysis
  • Timely, accurate reporting with rigorous controls to avoid data errors
  • Identify quality assets that are productive at a low cost – analyse revenue, vs direct expenditure and G&A to assets to get a full picture of assets productivity.
  • Analysing revenue vs direct expenditure with G&A to get a full picture of productivity 

These solutions combine to ensure that you have full budgetary control across both your finance and operational functions. Being able to demonstrate that your assets are productive at a low cost will make your business that much more appealing to investors.

3. Offering Multi-Country and Global Investment Opportunities

If your company is planning an IPO listing or looking for further investment, it is key that your systems support multi-currency, multi-accounting, taxation standards and multi-language to take advantage of global investment opportunities.

For example, Progressive TSL's client SEPLAT was applying for a dual listing on the Nigerian and London Stock Exchanges and so required not only USD reporting but also reporting in Nigerian Naira (NGN). Progressive TSL worked with SEPLAT to provide them with the multi-currency support that they needed for their listing using Infor SunSystems. Read the full SEPLAT case study.

Asset-intensive businesses often operate across a number of different countries or jurisdictions. This may require adherence to a range of financial regulations and multi GAPP reporting including IFRS, Syscohada and UK GAAP. For this and other reasons, you may need to implement multiple financial rule sets at the same time.

The Oil and Gas sector has been severely affected by the COVID 19 crisis; risk-averse investors are wary of choosing mid-caps that can't demonstrate strong balance sheets and lean production costs. Selecting Progressive TSL's finance solution - based on Infor's best of breed system - will give you the best tools to attract those investors during the difficult times ahead.

Contact Progressive TSL to benefit from our expertise in delivering finance and asset management systems to energy companies for over 15 years.

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