Course Details

This 3-day workshop will provide a comprehensive understanding on the nature of costs and cost drivers in the E&P industry providing in-depth understanding on the budgeting process, proactive management, effective control and optimization of costs together with focused and relevant performance reporting.

What You Will Learn        

• Understanding the nature of costs and cost drivers in the E&P industry through the Field Life Cycle
• Purpose of the Budget. Planning and Budgeting models. The Strategic and Medium-term plan
• Using budgets to make effective decisions. Prepare and understand costs in planning, budgeting & forecasting processes e.g. fixed / variable, capex / opex and routine / non-routine
• Cost Accounting. Importance of timely cost capture and accurate recording e.g. VOWD / accruals, consistency of coding and clarity on accountability
• Strategic solutions in delivering cost optimization – “do more for less”
• Management of costs in PSC and JV environments. Avoiding cost leakage and ensuring audit preparedness
• Cost Control Framework - budgets, AFEs, progress reports and variance analysis. Understanding key components and ensuring seamless interaction
• Cost Performance Reporting - use of KPI’s, variance analysis and trend analysis. Tracking and monitoring cost optimization initiatives and targets

Training Method

The course uses a combination of instruction, group discussions, practical examples and exercises to ensure attendees absorb both the theory and the practical application of the topics.

Overview of E&P Industry Cost

• Features of E&P industry and nature of costs
• Costs and cost drivers through the Field Life Cycle
• The cost curve and relationship to the oil market
• Significance of management and reporting of costs in the context of the Oil & Gas Industry

The Planning and Budgeting process

• Company vision and strategy.  Long-term and Medium-term planning
• Work Programmes and Budget.  Purpose of a Budget and various Budget models
• The role of Corporate Departments and Geographical Business Units in the budgeting and forecasting process

Cost Planning, Budgets and Forecasting

• Preparing budgets & forecasts in a volatile oil & gas industry
• Capture and understanding of costs in the planning and budget processes
• Preparation of Capex (facilities / wells), Opex and G&A budgets
• Understanding the importance of classifying cost: fixed / variable; routine / non routine; core / discretionary activities
• Use budgets to make effective decisions
• The importance of Forecasting – the “how & why” and the need to proactively capture different outcomes
• Budgeting and Forecasting as a non-operator in a JV

Cost Capture & Accountability

• Importance of principles & processes in accurate and timely capture of costs
• Cost Accounting models. Understanding cost structures, accountability and coding principles
• Principles on what and when to capture e.g. VOWD and Accruals
• Capturing costs e.g. completion of full well costs and allocation of costs

Strategic Solutions to Cost Management

• Understanding “doing more for less”principle on cost optimization
• Getting behind cost drivers and understanding requisite actions
• Understanding how different costs impact profit - break even analysis
• Benchmarking and how it can drive improvements
• Managing working capital and cash flow

Cost Control and Management in a PSC & JOA Environment

• Overview on principles of cost recovery in a PSC environment
• Importance of adhering to key processes to avoid cost leakage
• Understanding principles of a JOA and Accounting procedures
• Importance of preparedness for Cost Audits and key areas of contention

Cost Control Framework

• Overview of a Cost Control Framework
• Mechanisms for controlling costs: well costs and features of an AFE
• Project costs reporting – key elements of progress reports
• Cost control reports – approved, invoiced, committed and incurred cost
• Controlling costs (fixed and variable) against budgets and forecasts

Cost Performance Reporting

• Reporting of Capex and Opex costs highlighting key drivers
• Variance analysis providing root cause analysis and early warning
• Performance review reporting on cost initiatives and optimization targets
• Overview of KPIs and performance reporting

• Finance staff with accounting and financial management responsibilities
• Those responsible for devising budgets, managing and controlling budgets
• Professionals engaged in planning, budgeting and management reporting
• Finance & Audit staff engaged on cost and financial controls
• Business unit managers and personnel whose responsibilities include cost management, controlling budgets and performance reporting