4 Best Practices for Oil Production Allocation

As valuable team members, production accountants handle vast amounts of data derived from oil wells and gas lines. Company leaders then use this collected data to determine an entire operation’s overall production. However, since this data comes from a wide variety of sources and industry experts use different allocation techniques for different cases analysis can become complicated and time-consuming. Fortunately, accountants can utilize a few process upgrades and best practices to significantly reduce their manual processes, improve productivity, and increase accuracy.

Accounting for oil production

On the surface, calculating oil allocation is a simple equation: Beginning Inventory (BI) + Production – Sales = Ending Inventory. However, a few prohibitive factors make the calculation more complex in execution. For example, though meters for collecting, analyzing, and reporting on oil data exist, many are too expensive to install or maintain. As a result, operators often rely on manual mathematical models to calculate production from each well or line. However, the information they derive can become inaccurate, especially as parts degrade over the life of each well or line. Unless industry insiders design their production allocation processes with adaptability in mind, these calculations will inevitably be less than practical. Here are four best practices to help manage operations productively and gain a competitive advantage:

  1. Consult your schematics. Whether you’re in oil or gas, it’s important you consult your schematics — layouts of all your tanks and how they flow — as your first step. Many production accountants do not consider schematics because they are mainly designed by and for managers and engineers. However, schematics can help accountants allocate accurately by allowing them to visualize oil flow. Schematics can also alert production accountants to important changes such as a tank having been moved.
  2. Implement a process for run ticket reconciliation. Each time a transporter arrives to pick up oil, he or she submits a run ticket to report how much oil she or he removes. However, compiling and reconciling these tickets at the end of each month can be a tedious process for production accountants, especially if they do it manually. Automated workflows can significantly increase data integrity and improve efficiencies for production accountants each month.
  3. Leverage new technologies. Implementing new systems and updated technologies can help streamline operations. For example, a sensor that can detect and send information from the tank strapping factory directly to your production allocation application can help you reduce errors and alert production accountants to potential loss during reconciliation early in the process.
  4. Choose the right application. The days of Excel may seem long gone, but many production accountants still utilize spreadsheet formats to organize information. Similar but more up-to-date applications like P2 Merrick offer built-in workflows and adaptors. These applications help automate processes such as reconciling run tickets and come with built-in validations.

Production accountants and company leaders alike can greatly benefit by working with a partner who understands how to properly allocate oil production. Don’t be afraid to leverage new technology: Production allocation applications can reduce manual efforts, increase accuracy, and improve data integrity. This, in turn, can save production accountants both time and hassles.

Business leaders have a lot to consider when it comes to production allocation. You can achieve great success for your company with the right practices, tools, and partner — including a trusted partner like Value Global. Visit Value Global online today to get started.

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