Understanding COPAS Documents and Their Importance

COPAS DOCS: What are they? What aren t they? Why do we need them? PASSA Presentation January 25, 2022 1

Who is this guy? Dalin Error - In the industry since 1997 Currently President of PCS, Inc. in Houston, Texas. PASH/COPAS member since 2001 COPAS President for 2022 COPAS Energy Education Instructor Participated in numerous document drafts and teams 2

What is Dalins COPAS Docs Story? Taught School From 1991-1996 Career Change Law? Sales? NOT Accounting! 1998 - William R. Davis III, CPA Back to School Independent Study - COPAS Documents Find Your Own Answers; Return & Report Who Wrote This Stuff ? MFI-47 Overhead Rate Adjustments (April 2001) 3

Overview & Objectives Review the types and purpose of COPAS Documents Synthesize processes and procedures in development Understand how to access the COPAS Documents Identify/summarize key, recent and current documents Evaluate what comes next and how to be a part 4

FAQs Why do we need COPAS Documents? Where do Documents originate? What Publication Categories apply? Who drafts the Documents? Who reviews the drafts? Where do I find the draft Documents? How and when are drafts approved? Where do I find the final documents? 5

Why do we need the Docs? February 1961 COPAS Formed; Stronger as one! COPAS Mission Statement: COPAS provides expertise for the oil and gas industry through the development of Model Form Accounting Procedures, publications, and education. We are a forum for the active exchange of ideas which result in innovative business and accounting solutions. The industry needs a source; COPAS is the source. Sandbox rules (Logic, Thoughtfulness, Experience). 6

Where do Docs originate? It s not the Document Fairy, and it s not a vacuum No paid professionals; volunteer, service-based organization. Some Key Starting Points: What is going on in the industry? What challenges are accountants facing? Emerging Issues topics (Audit Subcommittee) Committees Initiating and Affected? 7

What Publication Category? Prior to 2007 Bulletins and Interpretations Now -- MF, MFM, MFI, AG (Council approves) and TR (BoD approves) Purpose of the document? Interpreting contractual language? Entirely new or adapt existing? Committee proposes, then BoD approves project (Majority vote) 8

Who drafts the Document? Still no Document Fairy Initiating Committee selects Lead(s) Team members recruited (Initiating & Affected) Experience versus exuberance Multi-year commitment Series of drafts 9

Who reviews the drafts? Everyone! Initiating and Affected Committees National and Local Society meetings Member Companies Outside resources as needed (Attorneys, CPAs, etc.) Review all; not just the voting drafts! 10

Where are the drafts? Often forwarded by National Chairs to Local Societies Members Section COPAS Website Minutes, Presentations & Drafts Comments, summaries, responses and prior drafts Warning! Drafts (even voting drafts) are not final until approved! Warning! Drafts for review and comment only! 11

Approval How and When? Leadership Handbook Sect 8 Defined, 28-step process Drafts/Comments/Reviews/Resolution Docs represent consensus, not total agreement MF/MFM/MFI Initiating (2/3), Affected (Maj), BoD (Maj), Council (2/3) AG/AGA Initiating/Affected (Maj), BoD/Council (Maj) TR/TRA Initiating/Affected (Maj), BoD (Maj) 12

Where are the Final Docs? ePublications Section - COPAS Website Paid Subscription Only! Individual ($1,600 setup & $350/year March 31) Corporate ($7,500 setup & $1,750/year March 31) COPAS members receive a 50% Discount! ePubs searchable across all docs by word or phrase Warning! Prior copies (CD, Print, PDF) are not current & NOT LEGAL for sharing, distribution or use. 13

What Arent COPAS Docs? COPAS Docs are intended to be useful, vetted guidelines and interpretations for common industry accounting issues and challenges. They are codified rules for the sandbox from reliable sources. COPAS Documents are NOT: FASB Standards GAAP (necessarily) Legally enforceable (although compelling) Contractual (usually) All-inclusive (works in progress) Contractually Superseding (minds still need to meet) 14

What are some COPAS Doc MVPs? Accounting Guidelines AG-6 (Oil Accounting Manual) AG-15 (Gas Accounting Manual) AG-9 (Vendor Audits) AG-19 (Expenditure Audit Protocols) AG-21 (Revenue Audit Protocols) AG-24 (Accounting Procedure Deviations) AG-29 (Shared Well Pad Cost Allocations) 15

What are some COPAS Doc MVPs? Model Form Interpretations MFI-17, 39, 51, 53 (AP Interpretation) MFs 1984, 1998, 2005, 2012 (Deepwater), or whatever MF applies MFI-21 (Overhead Principles) MFI-38 (Materials Manual) MFI-40 (24-Month Adjustment Period MFI-45 (Offshore Marine and Aircraft Allocations) MFI-48 (Application & Calculation of Overhead) MFI-56 (Rig-Related Costs) MFI-57 (Remote Technology Centers) 16

What are some COPAS Doc MVPs? Dalin s Lucky Seven! AG-19 Expenditure Audit Protocols Complete sandbox breakdown on expenditure audits Planning, initiating, arranging, conducting, reporting, resolving AG-24 Accounting Procedure Deviations Guidelines to request deviations on chargeability AFEs or letter agreements, key inclusions, examples MFI-38 Materials Manual Combines multiple older references into one-stop-shop Categorizing, pricing, disposition, loading, unloading, hauling Helped write this one! 17

What are some COPAS Doc MVPs? Dalin s Lucky Seven (Continued)! MFI-45 Offshore Marine & Aircraft Allocations The bible for allocations methodology Allocation litmus tests, multiplicity of examples, excellent glossary MFI-51 2005 COPAS Accounting Procedure Detailed guidance on COPAS s recommended land/shelf form Directly interpretive on all five major sections of the AP MFI-53 Deepwater Accounting Procedure Detailed guidance on COPAS s recommended offshore form Differences from prior forms, including overhead and chargeability Explains interdependencies with AAPL 810-2007 Offshore JOA MFI-57 Remote Technology Centers Defines nature, purpose and chargeability across all APs Key to understanding chargeability of the facility labor Helped write this one, too! 18

Most Recent Publications (Approved and In-Process) MFI-57 Remote Technology Centers Approved April 2021 MF-X COPAS 202X Model Form MFI-XX COPAS 202X Model Form Interpretation Form for land/shale/shelf wells Did not pass Committee vote in Fall 2021 Anticipated for new Committee vote in Spring 2022 with Council Approval in Fall 2022 MFI-40 24-Month Adjustment Period Seeks to define what constitutes First time charge Draft 1 submitted August 2021 and comments received On temporary hiatus to focus attention on new AP Must be brought to current COPAS document standards 19

So What Comes Next? Familiarize yourself with the COPAS Documents Identify your pain points in accounting; is there a doc for that? Read the drafts and offer (timely, meaningful) comments Volunteer to serve on a drafting committee. 20

Summary Takeaways COPAS Documents are a researched, peer-reviewed, vetted source of industry accounting information. COPAS Documents are originated, developed, drafted, reviewed and approved by COPAS members. Development or modification of a document arises from industry need. There are different tiers of documents, including MFs, MFMs, MFIs, AGs and TRs. Document approval is more onerous for COPAS Interpretations than for Guidelines. 21

Summary Takeaways Draft documents are generally shared by Committee, but they can always be accessed on COPAS.org in the Members section. Two new documents are currently in process a new Accounting Procedure (with Interpretation) and a modification of MFI-40. To stay relevant, we must stay current. What comes next? How can you help? You need COPAS; COPAS needs you. There is no Document Fairy; nothing is created in a vacuum. 22

Address Participant Questions 23

Dalin T. Error dalin.error@outlook.com dalin@pcsanalysts.com Wrk: 713-978-7040 Mob: 832-541.8630 24