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In order to produce one of these detailed statements, a JIB accountant would have to review invoices from each level comprising the overall structure of the company. In the oilfield services space, not every company is well equipped for international growth. Commercial risk, compliance, geopolitical issues, logistics… it requires additional resources and investment to do properly. Non-operators receive a percentage of the profit based on their share of the investment.

Let us handle your taxes so you don’t have to – and experience the benefit of having a professional file your return and maximize your deductions. MFI-45, Offshore Marine and Aircraft Allocations is an excellent COPAS oil and gas accounting publication to review when evaluating allocation methodologies. The publication has an offshore slant, but many of the examples contained in that publication could be applied to onshore wells and/or facilities.

Authorization for Expenditures

Companies can come together to form a joint venture (with one or more partners) so as to share the risk of capital ventures, such as laying pipelines or drilling wells. A joint operating agreement (JOA) is an agreement between two or more parties that outlines the terms for the exploration, development, and operation of an oil and gas property. One of these outlined responsibilities is for the Operator to issue monthly JIB statements.

When doing cost center allocations, you could keep track of costs at the compressor itself, and have those costs allocated back to your specific well. JIB accountants must have the ability to allocate costs based on production, because that allows a company to receive volume benefits, as opposed to making manual allocations. All shared costs must be billed accurately, and to do this, invoices must be prepared and delivered to the appropriate partners. Again, this is where a good software system can make a big difference because it will integrate with the accounts payable system to ensure accuracy and timeliness when preparing invoices. It’s so specific and specialized, operators often have an accountant on staff that specializes in JIB accounting.

Accounts payable and joint interest billing in oil and gas accounting

COPAS has a Model Form Accounting Procedure that speaks to the chargeability of various items that is an exhibit within the JOA. If all records have not been maintained faithfully and accurately, it is possible that charges could go unbilled, and those would represent losses to the operator. Business tax preparation means leveraging tax opportunities, remaining current on tax laws, and being proactive and minimizing risk.