This invoice work flow includes coding and approval as well as electronic paperless options. JIB statements are crucial records for non-operated working interest partners, detailing the expenses incurred. Unlike royalty owners who only receive deductions from production, non-operated partners incur their share of all well expenses before receiving income. The operator performs the drilling of a site, receives the initial profits from the project and manages the upfront expenses. The revenues and expenses are recorded by the operator and then divided out to the non-operator partners in a JIB statement. We know the keys to success in an outsourcing relationship are communication, diligence, and experience.
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The acronym JIB stands for «joint interest billing,» a form of accounting unique to the oil and gas industry. Due to the high costs and risks involved in an oil-drilling project, it is common for contra asset account several parties to come together in a joint venture that designates separate responsibilities and privileges. A joint interest billing statement divides the revenues and expenses from an oil project among its partners according to their standing agreement. JIB Accountants support a company’s joint interest billing accounting functions. They accurately record expenditures, maintain joint interest division of interests, allocations and overhead contracts, and verify that joint interest owners are properly billed. They coordinate partner audits of operated joint ventures, and participate in audits of non-operated joint ventures.
Producing Lease Operating Statements
We know what functions and costs are contractually chargeable and what are not given the agreement(s) in place, and we also understand how important asset control and reporting are. The transition to digital JIB involves choosing a reliable JIB software solution that fits specific requirements, developing an implementation plan and adhering to best practices. Regular audits and reconciliation processes, along with system updates, ensure the accuracy and integrity of financial records and leverage new industry advancements.
Transitioning from Paper JIBs to Digital Systems
- Because the industry can be high risk, high reward, it’s common for different parties to invest in a single drilling project.
- Who becomes the operator or the nonoperator on any given site is most often determined by who has the resources free at any time to devote to a new project.
- The information provided by Valor in this blog is for general informational purposes only, not to provide specific recommendations or legal or tax-related advice.
- Digital JIB systems offer several advantages, including eliminating the need for manual data entry and providing real-time visibility into financial data.
- For expenses, we know and understand JOAs and all the various Accounting Procedure vintages and their myriad of provisions.
- Joint interest billing and accounts payable are essential to maintain accurate records.
Moving from paper JIBs to digital systems marks a significant step towards efficiency and accuracy in oil and gas accounting. By embracing digital solutions, companies can streamline their financial processes, gain real-time operational insights and make data-driven decisions for better project management. Many operators have chosen to outsource their JIB and revenue accounting given the timeliness and sheer volume of work. We provide full-service JIB accounting, AFE accounting, oil and gas bookkeeping, accounts payable and joint interest billing, and financial, operational, and production accounting. Joint Interest Billing, or JIB, is a form of accounting specific to the oil and gas industry. Because the industry can be high risk, high reward, it’s common for different parties https://x.com/bookstimeinc to invest in a single drilling project.
- These programs allow for the tracking of the profits and expenses of a project over time.
- Our team has the ability to maintain and report pre-payments per AFE for each owner alongside their existing JIB accounts receivable balance.
- JIB accountants review invoices from various levels within the company, such as the district, field, and individual wells, to produce accurate lease operating statements.
- Many operators have chosen to outsource their JIB and revenue accounting given the timeliness and sheer volume of work.
- We maintain a ledger of owners’ billable expenses and a ledger at summary level as well as the well 88’s expenses in detail.
Understanding Joint Interest Billing (JIB)
Shareholders within the joint venture have different responsibilities and privileges. A JIB statement divides the expenses and revenue from a drilling project among the partners, based on the agreement in place. A solid grasp of JIB and its key elements is essential for oil and gas companies to ensure accurate cost tracking, financial transparency and effective joint venture management. In most oil and gas drilling arrangements, a primary operator is responsible for the actual drilling of a site. The oil and gas accounting primary operator receives the initial profits of the venture and undertakes the initial costs.
Authorization for Expenditures (AFEs)
One of the most common obstacles in JIB accounting is the complexity of calculations, especially when multiple parties are involved in a joint venture. This complexity can lead to inaccuracies in financial reporting, which can distort financial statements and performance metrics. For expenses, we know and understand JOAs and all the various Accounting Procedure vintages and their myriad of provisions.
- This is usually done at a time dictated by the tax structure of the area where the drilling is taking place.
- The primary operator receives the initial profits of the venture and undertakes the initial costs.
- Moving from paper JIBs to digital systems marks a significant step towards efficiency and accuracy in oil and gas accounting.
- Is a boutique full service CPA firm located in Centerport, New York, catering to closely held businesses and individuals.
- Due to the complex nature of this industry, it’s common for multiple parties to invest in a single drilling project.
In addition to accountants that specialize in JIB accounting, software programs are designed to accommodate the needs of the oil and gas industry. These programs allow for the tracking of the profits and expenses of a project over time. They can generate automated JIB statements that go out to the partners in a timely fashion. As with most accounting, some expertise in JIB is still necessary, but software makes the work less intensive. Because of the intricacies of most oil and gas contracts and the amount of effort that it takes to sort out billing and payment arrangements, it’s common for accountants to specialize in JIB accounting.
Accounts payable and joint interest billing in oil and gas accounting
- We know what functions and costs are contractually chargeable and what are not given the agreement(s) in place, and we also understand how important asset control and reporting are.
- One of these outlined responsibilities is for the Operator to issue monthly JIB statements.
- It’s so specific and specialized, operators often have an accountant on staff that specializes in JIB accounting.
- Let Martindale handle and manage your daily and monthly JIB process, from inputting invoices to creating and issuing the JIBs.
- These statements are essential for evaluating the profitability of operating sites and are crucial for financial analysis.
To gain a competitive advantage in the oil and gas industry and stay updated on industry best practices, professionals can join the Council of Petroleum Accountants Societies (COPAS). COPAS provides expertise, publications, and education for the oil and gas industry, fostering innovation and collaboration among accountants and professionals. Members have access to valuable networking opportunities, educational resources, and guidance on accounting practices and guidelines. Additionally, COPAS offers the Accredited Petroleum Accountant® (APA®) program, which certifies accountants within the oil and gas industry. Free and Basic users can access PDFs, while Plus customers enjoy the added benefit of downloading statements in Excel at no extra cost, resulting in significant savings. Future updates promise enhanced functionality, offering more granular workflows and better cash flow understanding at the operator and well level.