What Is a Joint Interest Audit and Why Is It Necessary?

Within the oil and gas industry, it’s extremely common for Operators to partner with other companies or working interest owners. Doing so allows them to share both costs and risks. However, in order to make sure that your business relationship remains a positive one, you need to trust that the Operators are following the terms and conditions of the governing agreements. Otherwise, you could be forced to shoulder more than your proportionate share of the cost burden or even discover your operations aren’t in compliance with the Joint Operating Agreement and the attached Accounting Procedure.

The bottom line is that trust has to be earned, and confirmed. Rather than make unfounded assumptions, you can find out whether your partners are meeting their obligations by performing a joint interest audit.

What Is a Joint Interest Audit?

A joint interest audit, also referred to as a joint venture audit, is essentially a detailed evaluation of expenditures and revenues to ensure the Operator has accurately accounted for joint interest expenditures and revenue. Joint interest audits are performed to ensure the Operator has accurately accounted for joint expenses based on the terms and conditions for the governing Operating Agreement and the Accounting Procedure.

Why Are Joint Venture Audits Performed?

For one thing, these audits ensure that the costs being incurred are accurately accounted for based on the controlling agreement. When these audits produce expected results, this can build trust between partners and showcase professionalism. Of course, audit results can also reveal when the Operator has been irresponsible or underhanded with joint expenditures. Joint venture audits can also be used to show whether reported revenues are accurate. Depending on the situation, these audits can strengthen mutually beneficial relationships or highlight the need for a departure. Having joint interest audits performed can also allow for cost recovery down the line and resolve potential issues.

How Can I Obtain Help With a Joint Interest Audit?

Poole Audit can provide you with the expertise required when the need for a joint interest audit is identified. Contact our team today to learn about our services and the next steps to take.