Did you know that Geological and Geophysical (aka G&G) well costs can be classified as assets and those costs can be depreciated?
Now, we’re not going to get all up in your biz about how you handle G&G costs for your taxes. We are not, nor do we want to be, your tax advisors. However, we can and will make it EZier for you to do you, or for you to do whatever your tax advisor tells you to do.
Here’s what we know. We know that you can classify G&G as an asset, and therefore it’s depreciable. But not depreciable like other tangible oil and gas assets. G&G has its own depreciation schedule.
That said, there are two paths to glory on how to handle G&G costs in your SSI Oil and Gas Accounting Software.
Path 1 – Notifying Investors of G&G costs on the Joint Interest Billing
At the very least, what you determine as G&G cost categories can be flagged as such on the JIBs. G&G costs will appear in a spot all by themselves, separate and apart from other tangible costs. Pretty much “in your face” and pretty cool for investors. Then investors can handle their piece of G&G costs however they would like. It’s EZ to flag the cost categories as G&G categories, and won’t change anything for how you’re handling your own company net share of the G&G category costs on your general ledger. If you’ve got those categories classed as Tangible and pointing to the Tangible Assets account (or anywhere else) on your General Ledger it will be status quo, no change.
G&G Category Set‐Up:
WM01 – Standards Maintenance – Categories. It’s the main/first screen that appears when accessing WM01. Enter/select the G&G category, like Seismic, and notice a Geological and Geophysical DD&A option right in the upper middle of the screen.
That does 2 things
First, as discussed in Path 1 above, this flag directs SSI as to where to put those types of costs on the JIB for your investors. Set the category to G&G to designate specifically as G&G on the JIB. Then run the JIB as normal. Any costs classed as G&G costs will appear as such on the JIB.
Second, what it also does (and here’s our segue into Path 2)…
Path 2 – Calculates Depreciation for your G&G assets on the specific G&G depreciation method
Ever hear of SSI’s Fixed Assets Module? Well…we’ve got one and it works great. In a nutshell, the Fixed Assets module takes costs flagged as Tangible Assets from the Well History and auto‐loads those assets into the Fixed Asset module. Fixed Assets will then calculate depreciation on those assets. And if you’ve got some categories flagged as Geological and Geophysical DD&A, when those assets are auto‐loaded from Well History Detail, those assets will depreciate the G&G on its own method.
Without going into the nuts and bolts of Fixed Assets, it’s important to mention that DEFAULT asset templates are used when importing Fixed Assets from the Well History. Tangible Assets use a DEFAULT asset template and, as part of the process a specific DEFAULT asset for G&G will also be used for costs flagged as G&G (from the category). Don’t worry…it’s EZ to set up the DEFAULT assets.
How are you currently handling your Fixed Asset depreciation? Calculating and processing Fixed Asset depreciation using SSI Oil and Gas Accounting Software makes it so EZ!
SSI has good documentation on how to set up G&G categories for both paths to glory. Also, SSI has good documentation on Fixed Asset Importing from Well History, as well as Fixed Assets in general.
If you would like to discuss using SSI’s Fixed Assets module and costs associated with the module, please don’t hesitate to contact us! We are happy to discuss the features and benefits of Fixed Assets and the many other “assets” that SSI Oil and Gas Accounting Software provides.
A fully integrated Oil and Gas accounting product is crucial to maximum productivity and analysis for your business and makes YOUR job EZier!!
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