Client need

A start-up, entrepreneurial senior management team backed by private equity was acquiring a large oil and gas asset, which included over 450 operated wells. The senior management team required due diligence and other transactional-related support throughout the process, as well as accounting transition services.

Baker Tilly solution

Backed by private equity, the team leveraged services primarily from two providers, an oil and gas field and project management service and Baker Tilly oil and gas client accounting.

Baker Tilly assisted the leadership team through the transaction and transitioned accounting for assets from the seller to the newly formed operating company (OPCO).

Before the deal closed, Baker Tilly worked with NAEM to put over 100 new master service agreements (MSAs) in place for OPCO with all vendors previously working on the assets for the seller.

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.

The accounting transition included:

• Establishing OPCO for state regulatory and tax filings
• Establishing OPCO relationship with institutional stakeholder and third party working interest owners
• Working with the seller’s accounting team to:
  - Transition internal cost allocation procedures and overhead charges
  - Transition tertiary recovery procedures and revenue recognition
  - Receive seller’s system data and analyze and convert to OPCO accounting system
  - Review/transition owner relations issues in progress
  - Transition field processing nuances, spreadsheets, system configurations, property names, owners, vendors, etc.
  - Review joint interest billing (JIB) decks to verify owners exempt from charges
  - Review revenue decks to verify institutional stakeholder was paid for tertiary recovery, flare and lease use gas
  - Prepare and reconcile final closing statement with the seller

Over the course of the project, the following additional challenges arose:

• Unanticipated need for production services consultants and software implementation project
• Unanticipated need for monthly revenue and expense accruals
• Minimum royalty obligations
• Review analysis of historical JIB billing practices

Baker Tilly professionals met these challenges head-on by leveraging our experience, expertise and connections. Our data conversion resources have over 20 years’ experience converting to and from every major energy software platform. The following are just some of the solutions we delivered:

• Worked with production team to set up and operated their Merrick environment without delaying the start date
• Retrieved up-to-date historical data from seller needed to forecast accruals
• Worked with outsourcing land managers to verify accuracy of JIB and revenue decks
• Helped land managers establish lease management software to track minimum royalties due
• Leveraged experience of Council of Petroleum Accountants Societies (COPAS) procedures to interpret joint operating agreement and review direct expenses charged to the joint account

Results achieved

In the end, Baker Tilly successfully transitioned the project on schedule and under the original estimate.

Baker Tilly strives to continuously add value to clients. In this case, efficiencies in our  outsourcing group  have further reduced the client’s per-well costs. We bring value to our clients on every transaction advisory assignment through the execution of each critically important component we are assigned.

Interested in learning how we can deliver similar results for you?