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Executive Education in Oil & Gas Accounting

Mimi Alciatore has extensive experience teaching executive education courses to corporate clients. Please contact her directly if you are interested in developing an in-house course or are interested in attending one of the public courses she currently teaches in. The following describes one such course.

Course Title

Accounting and Financial Reporting For Oil and Gas: "Everything You've Always Needed to Know But Were Afraid to Ask"

Summary

This Course Progresses Through Four Major Topic Areas:

  1. Fundamentals of Financial Accounting (General)
  2. Oil and Gas Accounting (Industry-Specific)
  3. Sources of Financial Information (General)
  4. Financial Reporting and Analysis (Firm-Specific)

Each section builds on the prior one(s), and they all contribute to the firm's financial profile: How the World Views the Firm.

By the end of the course you will

  • Understand How Oil Firms Compare their Performance to their Peers
  • Be able to Replicate the Financial Analyses in a Leading Article on Oil and Gas Companies from Forbes Magazine!

Who Should Attend

Accountants, Engineers, Geologists, Exploration Personnel, Internal Auditors, Financial Managers, Financial Analysts, Lawyers, General Managers, Petroleum Economists, Planning Department Personnel, Project Managers, Strategic Planners, Departmental Heads, and other personnel for whom financial training will help them understand the implications of, and thereby improve, their decisions in the firm.

Format

The course is usually structured as a hands-on, three-day, intensive course that combines lecture with exercises. Different variations can be arranged, depending on the background of the participants and the intended outcomes.

Course Structure

PART I: Financial Statements & Concepts

A. Understand the Fundamentals of Financial Accounting

  • Key Concepts
  • Terminology (AccountantsÕ Buzz Words!)

B. Learn to Read the Primary Financial Statements

The Balance Sheet

  • The Income Statement
  • The Statement of Cash Flows
  • The Financial Statement Interrelationships

C. Thomas Quinn Manufacturing Case Study

In this case study, participants analyze a series of business transactions of a firm and construct a Balance Sheet, an Income Statement, and a Statement of Cash Flows.

D. Mimi's Jeopardy Game: Review of Concepts & Terms

The class will play a Jeopardy Game where the categories and answers are based on the material covered by this point of the course. The game engages the participants, reinforces learning and is quite fun. I don't tell the participants beforehand that we are going to play the game, and it is a fun surprise when they find out. It also involves a different format of learning (that is, compared to lecture or working exercises) and provides variety to the course while reviewing the material and thereby enriching the learning.

Part II: Oil and Gas Accounting

In this part of the course, participants will learn fundamental concepts of Oil and Gas Accounting. It will cover underlying principles and issues; the accounting treatment of typical transactions of energy firms; many definitions, terms, and calculations; as well as the implications of the oil and gas accounting for the financial statements.

A. Oil and Gas Accounting Methods:

Full Cost & Successful Efforts Accounting

  • Conceptual Differences
  • Illustration of Effects of Oil and Gas Accounting Method Choice on the Balance Sheet and Income Statement

B. Oil and Gas Accounting Practice Set

This practice set offers a hands-on opportunity to examine how the accounting is done for each step of the exploration and production process: from conducting geological and geophysical (G&G) activities to tearing down the well. Participants learn what accounts are used, and how the accounting in each step of the E&P process affects the firms' financial statements. Participants record the accounting entries as we work through the case. This has been a very popular exercise. A summary of major topics includes:

    Exploration and Development Costs

    • Geological and Geophysical (G&G) Costs
    • Delay Rentals
    • Development Costs: Intangible Drilling Costs (IDC) and Equipment Costs
    • Accounting for the Completion of an Exploratory Well: Successful Wells & Dry Holes
    • Accounting for the Completion of a Development Well: Successful and Dry

      Production

      • Revenue - Oil and Gas
      • Production Costs ("Lifting Costs")

      Depreciation, Depletion, and Amortization (DD&A)

      Dismantlement, Restoration and Abandonment Costs ("Decommissioning")

      Interest Capitalization for Self-Constructed Assets

C. Supplemental Disclosures on Oil & Gas Producing Activities

  • Estimated Reserve Quantities
  • Sources of Change in Quantities
  • Capitalized Costs
  • Costs Incurred
  • Results of Operations
  • The Standardized Measure of Discounted Future Net Cash Flows
  • ources of Change in the Standardized Measure (10 Sources)

Part III: Financial Reporting and Analysis

A. Form 10-K and the Annual Report: MimiÕs 10K Walk

In this session, you will learn how to read Annual Reports, 10Ks, 40Fs, 20Fs, and 10Qs. We will examine key information that firms must provide in these reports and learn exactly where in the reports to find that data. There are many special U.S. reporting requirements for oil and gas companies. Form 10Ks have a substantial amount of information that is typically not provided in the annual report, including operational statistics such as number of wells drilled in a given year and prices received for oil and gas production. Each participant will be given a copy of an oil company's 10K and will "walk through" the 10K with Dr. Alciatore as she explains the nature and usefulness of various data provided in 10Ks. Similarly, we review information that must be provided in a firm's annual report. We will also discuss information found in Forms 40F filed by Canadian firms and Forms 20F which are filed by Non-US firms (other than Canadian companies) such as BP and Shell Oil.

B. FINANCIAL STATEMENT ANALYSIS OF ENERGY COMPANIES

This module examines ratios and financial analysis techniques that are used to assess the financial performance and risk of energy firms. A case study of several oil firms is used to examine the firms' recent financial and operational performance. Participants learn how to calculate the ratios as well as how to interpret them. A summary of ratios covered is given below.

  • Liquidity
  • Capital Structure Ratios such as debt-to-equity
  • Profitability Metrics such as Return on Capital Employed, Return on Assets, and Return on Equity
  • Finding Cost Ratios
  • Reserve Replacement Ratios
  • Reserve-Value-Added-to-Spending Ratios
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