Joint Ventures are a critical component of oil and gas production in the United States. In the simplest form, a joint venture is an agreement between invested parties to share in the risk (expenses) and rewards (revenues) derived from the production of hydrocarbons amongst the constituents to include private landowners, operators, investors and others. Joint ventures can be complex, and fulfillment of the terms can be tricky. Often in pursuit of scale, joint ventures may be seeking to develop large tracts of land across multiple leases and potentially across state borders.
In the Permian Basin, operators are drilling multiple vertical wellbores at different depths in a spider web of directions from a single pad site on the surface. Accurate ownership information and the need for defined allocation methods are critical. Keeping tabs on expenses, production and revenue for the participating parties for each project can be difficult and requires an accounting team who knows the ins and outs of finances in the oil and gas industry.
Operators who accurately track and report costs, and review reconciliations, vendors, billing and overhead are better able to instill confidence in their joint venture partners. Plus, accurate and timely accounting practices lower the risk of failing an audit, be it internally or externally driven. In addition, it is good business practice for nonoperators to understand the rights and responsibilities outlined in the JOA to assess how the operators are performing and assure their investments are treated equitably.
Enter our team at The Resource Group. We are highly skilled at managing this process from receiving expenses and coding them in accordance with the Joint Operating Agreement to managing complex marketing arrangements for revenue processing to understanding the assignability of wells and owners. Our clients range from non-operators to single-well operators to thousand-well operations with an investor deck in the tens of thousands, so rest assured we’ve seen it all.
Whether you are looking for expert monthly processing, internal review, or external joint venture audit services, TRG can help you set your accounting on the right path, improving confidence and avoiding a contentious relationship between operators and non-operator investors. Want to learn more? Let’s talk.