Article

Key essentials for implementing an oil and gas accounting system

Feb. 14, 2025 · Authored by Jake Goff

When implementing an oil and gas accounting system, the primary objectives are to ensure data integrity, streamline operations and minimize disruptions. This process involves careful planning and execution to optimize the transition and maximize benefits. Below are the key aspects of the process:

• Assessing your needs: Evaluating the company's needs and key objectives is critical for defining the requirements. A major factor in scope and complexity is determining the level of historical transactional detail to convert. The budget, timeline, and objectives drive this decision.
• Streamlining operations: Simplifying processes, consolidating systems, and using a centralized platform to eliminate inefficiencies, reduce duplication of efforts and improve overall productivity.
• Minimizing disruptions: Careful planning and execution of the conversion process to avoid significant interruptions to day-to-day operations, ensuring a smooth transition and quick resumption of normal business activities.
• Timing: Scheduling the implementation, conversion, validation, and training to minimize disruptions and ensure alignment with the company's overall operations.
• Budget considerations: Creating a comprehensive budget that includes software, hardware, personnel, training, consultancy, and potential system customizations, while considering long-term financial implications.
• Historical activity needs: Assessing and migrating historical data, establishing data mapping rules, and analyzing past financial performance to ensure data integrity and accuracy. Assessing and migrating historical data, establishing data mapping rules, and analyzing past financial performance to ensure data integrity and accuracy.
• Data integrity: Accurately migrating data from the old system to the new software platform to maintain data integrity, support informed business decisions, generate accurate financial reports, and comply with regulatory requirements. This includes master file data such as wells, owners, operators, vendors, Drilling and Other Intangible Costs (DOIs), and transactional data such as suspense and general ledger (GL).
• Customized reporting: Tailoring reports to specific user roles, analyzing historical data in depth, and tracking industry-specific key performance indicators to drive data-driven decision-making and optimize operations.
• Training: Comprehensive training ensures employees understand the new system, including historical data, industry-specific processes, and ongoing support to optimize the enterprise resource planning (ERP) system's features and functionalities.

Planning and project management

Before you embark on an ERP implementation it is essential to avoid costly mistakes to minimize disruptions, improve reporting and decision-making abilities. By clearly defining and prioritizing objectives and evaluating the costs of significant items, companies can establish a solid foundation for a road map, ensuring expectations and deliverables are met on time and within budget.

The first step is to create a cross-functional team led by the implementation sponsors. Depending on the organizational impact, the team usually consists of four to eight leaders from accounting, IT, land and operations.

Next, it is important to outline and prioritize objectives by categorizing key business objectives as ‘must have,’ ‘high priority,’ or ‘desirable. Once the objectives are established, the implementation team can better prepare the detailed timeline and project plan. This is an iterative process with the management team to derive an agreed upon project plan, key business objectives and budget.

Timing

After establishing the project plan, you can then formulate the best timing for the implementation. To minimize disruptions, it is crucial to conduct a thorough assessment of the company's needs, resource and contract service provider availability. By understanding the specific requirements and challenges faced by the accounting team, organizations can determine the best timing for the cutover. It is imperative to ensure there is some contingency for the test and training sections, as these can tend to overlap with existing close schedules and often fail to hit deadlines. This approach allows organizations to quickly resume normal operations and avoid prolonged disruptions that could impact their ability to serve clients and meet business objectives.

Budget

One of the key aspects to keep in mind when embarking on an oil and gas accounting ERP conversion is the budget. As with any complex undertaking, having a well-defined budget is essential to ensuring a smooth and successful transition. By carefully analyzing and allocating your resources, you can effectively manage costs and minimize any potential financial risks.

Creating a comprehensive budget starts with understanding the scope of the conversion project. This involves identifying all the necessary resources, including software, hardware and personnel. Take into consideration any additional costs such as training, consultancy, and potential system customizations.

Another key factor to consider is the timeline of the project. A longer conversion period often means higher costs, as resources need to be allocated for a more extended period. On the other hand, rushing the process can also lead to unexpected expenses due to errors or inefficiencies. By setting realistic timelines and aligning them with your overall budget, you can ensure that the conversion progresses smoothly without compromising quality or incurring unnecessary costs.

System design, configuration and integration

In an accounting system, getting a chart of accounts structure and cross reference mapping between the existing accounts are critical to the configuration process. While other master files and data can be updated after configuration, the chart of accounts structure and cross-referencing must be in place to ensure meaningful and efficient system configuration.

Configuration options require specialized expertise from the firm to collaborate and review options, reaching an agreed-upon initial configuration after two to three weeks. They involve three to six team members focused on the core business process, along with a system subject matter expert. one to three weeks, depending on the organization's size.

If integration is required, it should be treated as a separate project with technical resources from both systems to address timing and approach. Often, these can be managed manually until the new systems are stable. However, if this is not feasible, the project needs a clear timeline and deliverables as early as possible to avoid impacting the accounting system go-live.

Data conversion

Master files typically include the well master and associated hierarchy, business associates like owners, vendors, purchasers, operators and the division of interest.

This is an excellent opportunity to cleanse, merge and improve master file data. Depending on the scope of the historical transaction/GL data, you can limit these to only currently active records or those needed to support the transactional/GL conversion. Assigning an employee to own the process, manage the various attributes and flags of each master file, and be responsible for validation is crucial.

Additionally, consider that this should be a repeatable process. Maintaining all master files in both systems is challenging, but you need them converted early for training and testing purposes.

Historical transactional data

Addressing historical activity needs is crucial not only for the successful implementation of the new ERP system but also for maintaining the integrity and accuracy of financial records. It provides a comprehensive view of the organization's financial history, enabling better forecasting and strategic decision-making.

Training

Training is also essential for a successful oil and gas accounting ERP conversion. It ensures employees can navigate and utilize the new system effectively, optimizing its features and functionalities. By investing in comprehensive training, organizations can maximize the benefits of their ERP system and reduce the likelihood of costly mistakes.

We recommend starting with standardized system training provided online by the software vendor. This will establish a baseline of knowledge tailored to employees' needs and availability.

Once a test instance with master files is available, employees can begin training on their version of the system using actual data. This training can be conducted over three to four days in-house with a trainer or through two-hour blocks of on-the-job (OJT) training scheduled over several weeks. New issues and questions arising from this process may lead to additional conversions, system configurations, or other changes.

To finalize the training process, we recommend conducting OJT during the end-to-end testing and validation phase. This can be done in a parallel test mode with production or through end-to-end test scenarios for each module. Test owners participate in reconciliation and validation, leading the final training for their team members.

Testing and validation

Conducting thorough testing and validation throughout the process ensures issues are identified quickly and resolved before moving to the next stage of the project. We typically divide the validation process into the following stages, each building on the previous one and supporting the data conversion team and training efforts:

• Master file validation: Conducted early in the process and repeated at go-live to ensure a complete and finalized master file conversion.
• Subject team unit testing: Performed by the team after completing their OJT unit-level training. This process ensures that the team's knowledge and skills are effectively applied to validate functionality and requirements as the project advances.
• Systems integration end-to-end or parallel testing: Scheduled after the first pass of historical transactions is converted. This validates the conversion and builds on training to run all processes end-to-end.

Customized reporting

Customized reporting is essential for an oil and gas accounting ERP conversion. Each system offers unique options for prebuilt reports, dashboards and analytics. It's important to understand the available delivery and automation options to determine which dashboards or analytics should be incorporated. If third-party integrations or a shared reporting repository are needed, form a new, technically focused integration team to identify the best integration approach.

One key benefit of customized reporting is the ability to tailor reports to specific user roles and responsibilities. Different stakeholders within an organization need distinct types of information. For example, executives may require high-level summaries and key performance indicators to assess overall financial health, while operational managers may need detailed data to track costs and analyze operational efficiency. By customizing reports to match these needs, organizations can unlock valuable insights, optimize operations and improve their bottom line.

Tailoring reports to specific roles, analyzing historical data in depth, and tracking industry-specific KPIs enable organizations to gain insights, optimize operations and enhance their financial performance.