Upstream oil and gas operators are involved in hundreds of workflows. Automating these workflows can streamline business activity -- which is critical as the industry continues to search for ways to efficiently manage more assets with fewer resources.
There are 10 essential back-office workflows that every oil and gas operator should automate:
1: New Well Approved Notification
When a well spot is approved for drilling, the accounting and AFE teams need to set up the AFE and get approval so drilling can start as soon as possible. The production and revenue accounting teams also need to be notified, so that they can prepare for the well coming online and so that processing can start as soon as the well is ready to produce. That being said, oftentimes the AFE and cost center are not immediately set up when the well starts to produce. It could even be a month or two before the new well is set up, which delays revenue and requires extra work to go back and fix the missed months using prior period adjustments. A workflow tool can be used to eliminate missing newly drilled wells and new production by notifying the AFE team, land, production, and accounting immediately when actions are required for a new well.
2: Initial Division Order
When a new well starts producing, you have limited time to pay revenue to all owners – and, to do that, you need an approved division order. As time is short to get the required opinions, approvals, and signatures, not a minute can be wasted. Automating this process to manage the Division Order completion is critical to avoid penalty payments or other potentially greater liabilities. Creating a systematic sequence of events can ensure your teams are always in the know, wells don't get lost in the process, and you stay ahead of the game.
3: New Entitlement Deck
New entitlement decks arise all the time and need the approval of land and accounting. The accounting team must then update their agreements and payment decks to process revenue and joint interest billing. Missing items leads to more work in the form of prior period adjustments. With automated notifications, every department can stay up-to-date and lessen the need to adjust data retroactively.
4: Names & Address Management
Names and addresses of owners, vendors, partners, and others are all tied from land and accounting to production. Having a single process to set up and approve new and updated names and addresses ensures accurate records for payments, reporting, audit controls, and Sarbanes-Oxley compliance. We don't like to think of fraud happening, but it does – and having a clear workflow with appropriate controls and approvals ensures it doesn't happen at your business. Workflows will serve as a single point of entry, decreasing the data entry required in multiple products.
5: Ownership Change
Like new entitlement decks, ownership change is a process that is consuming an ever-increasing amount of analyst and manager time. If land and accounting are not kept efficiently in-sync, fund transfers may be wrong, incorrect owners may get paid, and the backlog of prior period adjustments expands even further. Feel confident in knowing that workflow can bridge this communication gap by notifying all accounting groups of the ownership change with the push of a button.
6: Production Measurement & Allocation Validation
Many companies validate that allocations ran successfully but don't evaluate each piece of the input data for accuracy. A good workflow would be for the operator to enter and verify the data in the field, followed by the production accountant running daily allocations. At this point in the process, the workflow could validate and gain approval for the accuracy of the allocation, as well as the raw data coming in from the field. If not, late discovery of an error leads to updating allocations across the entire network in addition to downstream rework across accounting and regulatory filing. Ultimately, this could lead to fines and penalties. The number of data points and short time for validation suggest an automated solution, such as a workflow tool, should be applied and values should be approved prior to pulling volumes for revenue or accruals calculation.
7: Revenue Validation & Approval
Most companies have a manual process to validate and approve revenue received and the expected distribution prior to cutting checks. This is often managed through a blizzard of printed reports and a scramble for signature approvals and audits. Automated workflows simplify this entire process end-to-end and provide continuous visibility into status and bottlenecks. Utilizing a workflow can ease this process and clean up your path to revenue processing, as well as significantly reduce the time and ease of audits.
8: Payout Management
Payout requires tracking when a well or partner is nearing payout. When done manually, the date is frequently missed, which results in more prior period adjustments, audits, and penalties. Create a process that will alert you when a payout is near, eliminating the extra work and penalties when payouts are missed.
9: Well Status Change
With every department defining well status for a different purpose and with a unique designation, there's no surprise that staying in sync has proven difficult and costly. Automating this procedure to manage notifications will ensure that production, revenue, land, billing, and other processes see the data they need, when they need it – which is critical to successful operations and ensures shut-in payments are made on time.
10: Accounting Close Processing
Accounting close delivers accurate financials that enable timely and accurate business decisions to be made, and these decisions help you improve your business and profitability. The proper workflow tool can ensure each person sees what needs to be done, while alerting the team to missing items or people.
Workflows impact many departments and, when used correctly, they save you colossal amounts of time and ensure that you and your colleagues are following your established practices and reducing costly rework, painful audits, and missed deadlines.
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