Oil and Gas Accounting

1. FACULTY OF BUSINESS EDUCATION (FBE)
Department of Accounting Education
Course Outline
Course Title: OIL AND GAS ACCOUNTING
Couse Code: ACC 621
Level: 600
Course Lecturer: PROF. JOSEPH MBAWUNI
Academic Year 2020/2021

2. 1. Introduction
Arguably, the oil and gas industry continues to be one of the largest in the world with
billions of dollars in revenues changing hands and the largest royalties and taxes of
any industry going to governments around the world. Financial, cost and tax
accounting for these funds is of great interest to companies, investors, and
governments.
This is a fundamental and fully updated accounting course that covers key aspects
of oil and gas financial accounting and reporting in accordance with the relevant
IFRS reporting requirements.
2. Course aim(s) and objectives
The aim of this course is to provide:
 accounting students with specific technical knowledge of matters directly
related to oil and gas accounting.
 Management and other skilled professionals will gain insight into the primary
scorekeeping functions of their company and industry and an appreciation for
the unique nature of oil and gas accounting.
 Investment and banking individuals will gain greater insight into how
accounting information in the oil and gas industry indicates performance and
valuations.
 Financial statements and ratio analysis will benefit all in understanding the
relative merits and performance of companies in the industry.
3. Learning outcomes
At the end of the course, students will obtain understanding and treatment of the
following in the preparation and presentation of oil and gas financial statements:
>An overview of the Oil and gas industry and its current challenges
> Oil and gas financial accounting and reporting principles
> The two main methods of Oil and gas accounting
> Preparation of financial statements using Full cost vs successful efforts
> Accounting for:
 exploration and production costs
 Drilling and development costs
 Depreciation, depletion and amortisation
> Asset impairment, restoration and abandonment provisions
> Accounting for Oil and Gas Revenue
> Joint Ventures and Production Sharing Contracts

3. 4. Syllabus
Overview of the industry and review of oil and gas accounting
• Overview of the current challenges in gaining access to reserves
• The nature of the industry and the role of the financial accountant
• Oil and gas financial accounting and reporting principles
• What are the financial accounting and reporting challenges and how do they differ
from other industries
• Specific accounting terminology, concepts, policies and procedures
• Various types of reserves
• Basic differences between full cost and successful efforts accounting
• Insights into why financial statements are so different
Accounting for non-drilling exploration cost – Successful efforts and Full
Costs
• Accounting for geological and geophysical studies
• Carrying and retaining costs of unproven properties
• Dry-hole and bottom-hole contributions
• How are the costs of evaluating a prospect handled?
Drilling and development costs – Successful efforts and Full Costs
• Computing depreciation, depletion and amortisation (DD&A) on producing fields
• Depreciation of supporting equipment and facilities
• Accounting for future dismantlement and site restoration costs
• How are capitalised costs written off?
• What are the relevant accounting standards?
Accounting for production activities
• Definition and types of costs incurred
Revenue accounting
• Accounting for revenue from sales of oil and gas
• Accounting for take or pay provisions
• Minimum loyalty provisions
• How to account for revenue transactions
• When is revenue recognised?
Joint Ventures (JVs) and Production Sharing Contracts (PSCs)
• Examining JVs, PSCs and accounting procedures
• Methods to allocate JV costs
• The operator’s accounting for costs for regular accounts or distributing joint costs as
incurred
• Accounting for transfers of equipment between properties
• Accounting for wells when joint owner goes non-consent
• How do operators and non-operators track and account for costs of joint
operations?
Financial disclosures
• Required disclosures, source nature and examples
 Recognize the different oil and gas accounting methods
 Understand financial reporting requirements for oil and gas companies under
IFRS
 Apply capitalization rules and depreciation methods

4. 5. Learning and Teaching Strategy
The course consists of weekly three-hour lectures. In most lectures, the format will
be approximately as follows:
First hour – Lecture and discussion on theoretical concepts and principles
Next two hours – Workshops – Activities including practical solutions of sample
questions on the topic the week
At UEW, the focus is your self-directed search for knowledge. Lectures, Seminars,
Quizes, exams, and others are all provided to help you learn. You are therefore
required to attend all lectures, seminars, and participate in all quizes, in order to fully
grasp and appreciate the concepts of financial accounting.
6. Teaching plan
Weeks Topics and associated activities Tutor
1
16th Sept
Overview of the industry and review of oil and gas accounting
2 Undertanding Oil and Gas Accounting terminologies
3 Accounting for Acquisition, Exploration and Development
Costs - Successful efforts and Full Costs
4 Accounting for Acquisition, Exploration and Development
Costs - Successful efforts and Full Costs
5 Accounting for Depreciation, Depletion & Amortisation
6 The Ceiling Test - Limitation To Capitalised Costs
7 Accounting for production activities
8 International Financial Reporting Standards Applicable To
The Oil And Gas Accounting
9 Accounting for Oil and Gas Revenue - Upstream
10 Accounting for Oil and Gas Revenue - Downstream
11 Industrial Visit to Down Stream Operation – BOST and Retail
Site
12 Joint Ventures (JVs) and Production Sharing Contracts
(PSCs)
weeks Revision
weeks Examination
7. Assessment Strategy
Mode of Assessment
Students will be assessed as follows:
 Class Quiz 1 20%
 Class Quiz 2 20%
 End of semester examination 60%
There will a 3-hour closed-book written exam at the end of the semester
Note: Credit may be awarded for class participation.

5. 9. Reference
RECOMMENDED REFERENCES:
1. Broke, K.H. (2001). Accounting for oil and gas producing companies (5th ed.).
Boston: McGraw Hill.
2. Charlotte, J.W. & Gallyn, R.A. (2008). Formulating oil and gas accounting (5th
ed.). London: Pitman.
3. Johnston, D., & Johnston, D. (2005). Introduction to oil company financial
analysis. Tulsa, Oklahoma: Penn Well Corporation.
4. Krester, R. J. (2002). Handbook on oil and gas accounting. London:
Springer.
5. Smith, C. (2004). Accounting for oil and gas: Amortization, conveyance, full
costing and disclosure. London: Thompson Learning.
6. Wright, C. J. & Gallun, R. A. (2005).International petroleum accounting. Tulsa,
Oklahoma: Penn Well Corporation.
7. Wright, C. J., &Gallun, R. A. (2008). Fundamentals of oil & gas accounting
(5th ed.). Tulsa, Oklahoma:PennWell Corporation.