The Painful Cost of Non-Integrated Solutions in Upstream Oil and Gas Accounting04/28/2022
One of the biggest challenges facing oil and gas accounting and finance teams is the lack of centralized data – or the absence of data integration across systems and databases.
Land has its applications and databases, production has its applications and databases, engineering and operations have their applications and databases, etc. Most of the time, these databases don’t connect to each other or have common elements that are consistent. For example, there can be wells in all of these systems, but they are not always the same. If they are manually entered or maintained independently, then the same well may have different spellings or API numbers that make them difficult to compare or leverage as a connection between systems.
The main headache for accounting is that this drives the need for reconciliations across systems to clean up the data, which is human intensive work, and therefore, costly. It means that the accounting team can’t simply pull data into their processes without significant QC of the data and/or keying the data in themselves. I can’t tell you how many companies I have visited that repeat some of what the production accounting team does in the revenue process because they can’t trust the numbers coming from production. This increases manual work each month, slows down the close process, and decreases consistency and accuracy of data across departments. From a financial reporting perspective, this limits the ability to quickly tie data together and analyze in unique ways since the aggregation of the data and cleansing of the data takes much longer.
Upstream operators that have systems and databases that are connected, with a single place to manage master data like wells, can reduce their internal processing time and cost, reduce time to close, and improve accuracy. At the same time, financial reporting teams can provide quicker and better analysis to executives and operations teams so that they can make better decisions, control and reduce their operations costs, and improve the profitability of their companies.
Learn more about the importance of managing your company holistically using end-to-end business processes that cover all facets of upstream oil and gas – from the field through financials – with The Power of P2.
Tim Wadle, VP, Large Cap & Integrated Solutions