OIL, GAS, AND OTHER NATURAL RESOURCES in .NET

Creating QR Code JIS X 0510 in .NET OIL, GAS, AND OTHER NATURAL RESOURCES
CHAPTER
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OIL, GAS, AND OTHER NATURAL RESOURCES
QR Code JIS X 0510 Generator In .NET Framework
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Richard P Graff, CPA
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The Graff Consulting Group
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Joseph B Feiten, CPA
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INTRODUCTION OIL AND GAS EXPLORATION AND PRODUCING OPERATIONS ACCOUNTING FOR JOINT OPERATIONS (a) (b) (c) (d) Operator Accounting Nonoperator Accounting Other Accounting Procedures Overview of Accounting Standards
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ACCOUNTING FOR NATURAL GAS IMBALANCES (a) Sales Method (b) Entitlements Method (c) Gas Balancing Example
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HARD-ROCK MINING (a) Mining Operations (b) Sources of Generally Accepted Accounting Principles
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ACCOUNTING FOR MINING COSTS 14 (a) Exploration and Development Costs (b) Production Costs (c) Inventory (i) Metals and Minerals (ii) Materials and Supplies (d) Commodities, Futures Transactions (e) Reclamation and Remediation (f) Shutdown of Mines (g) Accounting for the Impairment of Long-Lived Assets 14 15 16 16 17 17 17 18 18
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ACCEPTABLE ACCOUNTING METHODS (a) The Successful Efforts Method (i) Basic Rules (ii) Exploratory versus Development Well De nition (iii) Treatment of Costs of Exploratory Wells Whose Outcome Is Undetermined (iv) Successful Efforts Impairment Test (v) Conveyances (b) The Full Cost Method (i) Basic Rules (ii) Exclusion of Costs from Amortization (iii) The Full Cost Ceiling Test (iv) Conveyances
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ACCOUNTING FOR MINING REVENUES (a) Sales of Minerals (b) Tolling and Royalty Revenues
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SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION ORE RESERVES
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This chapter was updated from the Ninth Edition by Richard Graff and the editors
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OIL, GAS, AND OTHER NATURAL RESOURCES 2912 SOURCES AND SUGGESTED REFERENCES
2910 ACCOUNTING FOR INCOME TAXES 20 2911 FINANCIAL STATEMENT DISCLOSURES
291 INTRODUCTION
Accounting for oil and gas activities can be extremely complex because it encompasses a wide variety of business strategies and vehicles The industry s diversity developed in response to the risk involved in the exploration process, the volatility of prices, and the uctuations in supply and demand for oil and gas In addition to having a working knowledge of accounting procedures, the oil and gas accountant should be familiar with the operating characteristics of companies involved in oil and gas activities and understand the impact of individual transactions Oil and gas activities cover a wide spectrum ranging from exploration and production activities to the re ning, transportation, and marketing of products to consumers Special accounting rules exist for exploration and production activities Accounting for re ning activities is similar in many ways to other process manufacturing businesses Likewise, transportation and marketing do not differ signi cantly from one end product to another This chapter focuses on the special accounting rules for petroleum exploration and production The same may be said for the mining and processing of minerals except that the accounting rules for mineral exploration and production are not so formalized as for petroleum
292 OIL AND GAS EXPLORATION AND PRODUCING OPERATIONS
Oil- and gas-producing activities begin with the search for prospects parcels of acreage that management thinks may contain economically viable oil or gas formations For the most likely prospects, the enterprise may contract with a geological and geophysical (G&G) company to test and assess the subsurface formations and their depths Three-dimensional (3-D) seismic studies send sound waves thousands of feet below the earth s surface, record the million echoes from underground strata, and use powerful computers to read the echoes to create 3-D electronic images of the underground formations With these ultrasounds of Mother Earth, the enterprise evaluates the various prospects, rejecting some and accepting others as suitable for acquisition of lease rights (prospecting may be done before or after obtaining lease rights) Specialists called landmen may be used to obtain lease rights A landman is in effect a lease broker who searches titles and negotiates with property owners Although the landman may be part of the company s staff, oil and gas companies often acquire lease rights to properties through independent landmen Consideration for leasing the mineral rights usually includes a bonus (an immediate cash payment to the lessor) and a royalty interest retained by the lessor (a speci ed percentage of subsequent production minus applicable production taxes) Once the leases have been obtained and the rights and obligations of all parties have been determined, exploratory drilling begins Because drilling costs run to hundreds of thousands or millions of dollars, many companies reduce their capital commitment and related risks by seeking others to participate in joint venture arrangements Participants in a joint venture are called joint interest owners; one owner, usually the enterprise that obtained the leases, acts as operator The operator manages the venture and reports to the other, nonoperator participants The operator initially pays the drilling costs and then bills those costs to the nonoperators In some cases, the operator may collect these costs from nonoperators in advance The operator acquires the necessary supplies and subcontracts with a drilling company for drilling the well The drilling time may be a few days, several months, or even a year or longer