When it comes to the funding of oil and gas projects, it can get expensive and overwhelming. As a way to reduce the overall costs of a drilling project, multiple parties can invest in the venture and, in return, profit from it. The parties also help take on some of the many responsibilities necessary to operate a successful project. This is where Joint Interest Billing (JIB) comes into effect.
Who’s involved in a JIB operation?
When starting any project, it must first be determined which parties are classified as operators and non-operators. Operators are the main investors in the project. They perform the initial drilling of the wells and can usually be found working onsite. Operators also manage/divide out the key responsibilities for each oil well, receive the first initial profits and expenses, and ensure the project remains compliant. A JIB statement is a written document with the recordings of each of these tasks, and the operator is also responsible for sending this out to all stakeholders in a timely and organized manner.
Non-operators are usually off-site and are rarely found at the actual project location. These parties are simply interested in the project’s value or the potential outcomes of the well. They usually invest by lending a monetary investment. It is important to note that you can be an operator for one specific project and be a non-operator at a different project site.
Why is JIB Important?
- Financial Transparency: Documenting all financial expenses in a neat and orderly fashion, the JIB process helps build trust and transparency amongst all investors.
- Cost Management: By accurately tracking costs, investors can optimize spending and make appropriate financial decisions.
- Compliance & Accountability: Following JIB standards ensures industry compliance are being accurately followed, along with any terms highlighted in the initial agreement documents.
- Risk Mitigation: There are many financial risks involved when it comes to joint interest investor projects. JIB helps reduce these risks by ensuring all expenses are appropriately divided among investors.
- Dispute Resolution: Clear JIB documentation also helps resolve any potential disputes that may arise regarding cost and revenue distributions.
How can PakEnergy help operators manage JIB activities more efficiently and with greater accuracy?
With constant changes in your non-operator groups, accurately allocating costs to investors can be a strenuous task. PakEnergy Accounting software for oil and gas operations can help alleviate these challenges. PakEnergy gives you the power to manage thousands of properties at the individual level, with different percentages, exemptions, summaries, and their investors all in one place! Some of the system’s easy-to-use features include:
- Statement summaries for JIB charges by lease expense type or prospect on a per-owner basis
- Extensive AFE integrations, management, and reporting, including auto-application of AFE pre-payments
- Unlimited number of Division of Interest (DOI) allowed for a property
Want to learn more about how PakEnergy can help you in your JIB ventures? Schedule a demo with one of our oil and gas accounting experts today. You can also check out our webinars to see how PakEnergy can help you manage all aspects of your oil and gas land, production, accounting, and transportation operations today.
