Question 8 - Do your auditors authenticate well counts for Annual Information Form’s?

This is the eighth question in the list of ten questions to ask your auditor if you are a Canadian based oil and gas company. The original post can be found here.

Do your auditors authenticate well counts for Annual Information Form’s?

A quick definition on the Annual Information Form (AIF):

A source of additional investor information not included in a company’s prospectus or annual financial statements. Required by law and must be given to you free of charge if you request it. From http://www.getsmarteraboutmoney.ca/tools_and_calculators/glossary/definition/Pages/annual-information-form-aif.aspx

Although the Annual Information Form does not have the same impact as a quarterlies and annual financial statements, they are important as this is were a publicly listed oil and gas company show what their reserves are and how many wells they own (among other pieces of information).

We have seen in one instance, where a company had 222 gross wells but only listed 57 in their AIF. In another example, a company that we worked with were out by 16% on their net well count. A couple of mighty big discrepancy. If your auditor can not identify how many wells you own our if they can not assist you with this process, then chances are, as an oil and gas company, you might be incorrectly stating reserves and hence, either overstating or understating your asset value. This has an impact on the depletion, depreciation and amortization (DD&A) costs, which would make them lower.

These opinions are mine and may not reflect your view. If you would like to contact me, then please feel free to do so at info@argentis-group.com. Argentis Group assists oil and gas companies with operational audits to identify areas to reduce costs, increase revenues and increase the overall asset value of an oil and gas company.