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oil and gas accounting

Companies record exploration costs capitalized under either method on the balance sheet as part of their long-term assets. This is because, like the machinery used by a manufacturing company, oil and natural gas reserves are considered productive assets for an oil and gas company. Generally accepted accounting principles (GAAP) require that companies charge costs to acquire those assets against revenues as they use the assets.

  • Our course is a deep dive into the intricate world of oil and gas accounting, designed to equip you with the skills and knowledge to navigate this specialized industry confidently.
  • As an intricate discipline, oil and gas accounting plays a pivotal role in valuing assets, managing risks, and supporting sustainable practices in the exploration, extraction, and production of oil and gas resources.
  • Harrison is very involved with the University of Tulsa, where he earned a degree in MIS and Accounting.
  • ​The FASB and IASB are nearing the end of their journey toward enhancing lease accounting.
  • You measure the company’s reserves (how much they have on their balance sheet, ready to extract, produce, and sell) and production (how much they produce and sell each day, month, quarter, year, etc.) in these units.
  • Testing your current systems can evaluate your safety levels and identify controls you need for further preventive measures.

Read more about how we help clients enhance their customer experience, improve business performance, and drive new revenue streams—then let us do the same for you. To address this, deal makers and buyers’ executive teams should actively seek to obtain as much data as possible from the seller during the acquisition process. While success isn’t guaranteed, making the effort to secure this critical information is essential. While the number of deals may have been less in 2023 than in the prior year, we can see a growing differential between larger and smaller players where smaller entities are struggling to find the capital for a merger or acquisition.


For instance, although IT professionals may excel at data manipulation, revenue experts should be involved in verifying the setup of revenue decks to ensure a smooth initial revenue run. Advanced technology and an evolving regulatory environment are rapidly changing the industry, causing frequent price fluctuations and enhanced production demands. To stay competitive, your business needs to adapt while safely maintaining its operations.

oil and gas accounting

So you might create a “low” scenario where oil prices are, say, $40 per barrel, a “middle” scenario where oil prices are $70 per barrel, and a “high” scenario where oil prices are $100 per barrel. It will help with your job and career, and you will gain knowledge you can’t get sitting at a desk. The people in COPAS have mentored me, answered questions for me, and genuinely cared about me and my family. The reduction in Chinese energy use last year kept world prices from soaring even higher after Russia’s invasion of Ukraine, giving relief to Europe and the United States as they struggled to manage cuts in energy imports from Russia.

Senior Revenue Accountant

However, reality often falls short of this, and obtaining this data can be a challenge. Additionally, accounting teams often find themselves in a guessing game when dealing with accounts that lack clear reconciliations. Balances may be carried over at book value for fair value purposes, but the lack of understanding about these balances can lead to indefinite delays or eventual write-offs.

DTTL (also referred to as „Deloitte Global“) does not provide services to clients. In the United States, Deloitte refers to one or more of the US member firms of DTTL, their related entities that operate using the „Deloitte“ name in the United States and their respective affiliates. Certain services may not be available to attest clients under the rules and regulations of public accounting. This section summarizes recently enacted federal legislation affecting the financial reporting of income taxes and new and proposed FASB guidance on accounting for income taxes. ​On May 28, 2014, the FASB and IASB issued their final standard on revenue from contracts with customers. The standard outlines a single comprehensive model for entities to use in accounting for revenue.


Oil and gas companies need to adhere to specific regulatory and tax reporting requirements, and their financial reporting has to comply with industry standards and guidelines. These requirements vary widely from state to state, and it’s important to have a system that can support these requirements and make compliance a breeze. As oil and gas reserves are extracted, companies need to allocate the costs of acquiring and developing these reserves over oil and gas accounting time. DD&A is the accounting method used to spread these costs over the life of the reserves. If you decide to combine them, several additional considerations arise, including the implications for significance testing, financial statement requirements, and financial reporting. These factors need to be carefully weighed and addressed to ensure accurate and compliant accounting practices in the complex landscape of multiple concurrent transactions.

oil and gas accounting

Each of these has its own unique set of departments that handle the various entries and procedures to ensure costs and revenue are accounted for properly. You can roll up most niche accounting functions into one of those six primary functions because all industries have capital expenditures, operating costs, G&A, revenue, and production. However, without the subsequent discovery of new reserves, the resulting decline in periodic production rates will later begin to negatively impact revenues and the calculation of DD&A for both a SE and FC company. When identical operational results are assumed, an oil and gas company following the SE method can be expected to report lower near-term periodic net income than its FC counterpart. There are a lot of differences with oil, gas, and mining companies but the overarching ones are that they cannot control prices and that they have depleting assets that constantly need to be replaced. A merger model is a merger model is a merger model no matter how the company earns revenue, so nothing changes the fact that you need to combine all 3 statements, allocate the purchase price, and factor in synergies, acquisition effects, and so on.