Oil and gas asset acquisition benefits from outsourcing accounting

Client background

A small leadership team of two was assigned to oversee a significant oil and gas asset acquisition, encompassing 460 operated wells, many of which were leased on a university’s land. Baker Tilly supported the leadership team throughout the transaction, facilitating the transition of asset accounting from the seller to the newly established operating company (OPCO).

After the transaction closed, the leadership team only had two months to transition asset accounting and field operations from the seller. OPCO sought additional support from the seller through a one-month transitional services agreement (TSA) with the potential for additional TSA fees for every month of delay.

Baker Tilly solution

Before the deal closed, Baker Tilly worked with the company to put over 100 new master service agreements (MSAs) in place for OPCO with all vendors previously working on the assets for the seller. The accounting transition included setting up OPCO for state regulatory and tax filings, as well as establishing OPCO's relationship with university lands and third-party working interest owners.

Baker Tilly collaborated with the seller’s accounting team on the following:

• Transitioning internal cost allocation procedures and overhead charges
• Shifting tertiary recovery procedures and revenue recognition
• Receiving, analyzing and converting the seller’s system data to OPCO accounting system
• Reviewing and transitioning owner relations issues in progress
• Managing field processing nuances, spreadsheets, system configurations, property names, owners, vendors, etc.
• Verifying owners exempt from charges by reviewing JIB decks
• Reviewing revenue decks to verify university lands were paid for tertiary recovery, flare and lease use gas
• Preparing and reconciling final closing statement with the seller

Results

Baker Tilly professionals met these challenges head-on by leveraging our extensive experience in data conversion across various software platforms. Baker Tilly was able to help identify the following solutions:

• Collaborated with the production team to set up and operate their software without delaying the start date
• Retrieved up-to-date historical data from the seller, which was needed to forecast accruals
• Worked with outsourcing land managers to verify lease discrepancies with university lands
• Assisted land managers in establishing lease management software to track minimum royalties due
• Utilized our knowledge of the Council of Petroleum Accountants Societies (COPAS) procedures to interpret joint operating agreements and review direct expenses charged to the joint account

In the end, Baker Tilly successfully transitioned the project on schedule and below the original cost estimate. Our team is dedicated to continuously adding value to clients on every transaction advisory assignment by executing each critically important component we are assigned. In this case, our outsourcing group's efficiencies have further reduced the client’s per-well costs to a fraction of COPA's overhead.