Despite digital oilfield advances, the oil & gas business still runs on paper. This is especially apparent in field operations where the bulk of purchasing transactions take place, including services for drilling contractors, hydraulic fracturing, pumpers, equipment repair, and workovers. There are also a wide variety of tangible costs incurred, such as drilling mud, casing cement, pipe, and equipment rental.

Depending on the size of the operator, anywhere from dozens to hundreds of vendors are involved in support of upstream and midstream operations. And each vendor has their own billing standards, creating a chaotic mix of invoice formats and processes. All too often transactions occur informally on a job site with printed work orders, field tickets, and invoices casually changing hands.

As an operator, it is imperative for your team to know as soon as expenses have been incurred, even if they haven’t yet been formally invoiced. Combined, your outstanding AP obligations create a large pipeline of expenses that must be reconciled with what was budgeted at the individual project, department, and corporate level. Adding complexity, payment terms vary from vendor to vendor with varying payment due dates and supplier discounts. This creates additional uncertainty for AP and accrual as expenses are fed into the pipeline that might be due in net 30 days or 60 days with discounted rates that are tied to vendor agreements.

 

 
Oil and Gas Expense Pipeline