Lessons from an Energy Controller: Lesson 4 – Excel: Picking the Right Tool for the Job

Why Spreadsheets Remain a Dominant Force in the Energy Back Office

So far in my blog series, I’ve covered 3 lessons that draw on my experiences as a CPA with three decades in the oil & gas business.  These have included why going with the herd isn’t always best when selecting accounting solutions, the importance of challenging the status quo and being receptive to change, and how consulting firms that masquerade as tech companies accrue massive costs for energy companies.

There are a number of “old school” technologies that draw a lot of fire these days, like e-mail.  Some complain that we’re still using a technology that has been around for decades.  It has, but it’s also evolved and it’s the #1 tool everyone relies on to communicate, despite IM, Skype, and Slack.  Excel is just like that too.  People love to hate on it, but it’s kept up, for the most part, with the needs of accountants.

It’s a matter of picking the right tool for the job.  As accountants, we naturally gravitate toward spreadsheets.  And that is perfectly fine.  Sometimes Excel is all you have, like when we were starting Agave (a Yates Petroleum subsidiary).  Our goal was to process and move gas to market and we started off with a pragmatic, homegrown spreadsheet-based solution for allocations and gas statements for producers on the system.  We were settling with producers at the wellhead and it was good until they got wise to the money in midstream and wanted a percent of proceeds (POP).  That’s when we knew we had outgrown Excel.

You have to know the limits of a spreadsheet, which is why we pivoted to the leading plant accounting solution at the time.  If you’ve read previous posts you know just how that went, but we stuck with it for three years.  It wasn’t all we had hoped it would be, which brings me to the reason Excel is still a go-to even when you have a so-called “right tool” for the job.

Lack of confidence in plant accounting calculations and functionality gaps led my team to perform extensive validations and workarounds in spreadsheets, including:

• Calculating inflation rates
• Verifying escalation schedules
• Calculating fixed recoveries and changing from ethane recovery to rejection
• Tracking minimum volume commitments
• Creating deficiency invoices
• Handling cumulative imbalances
• Handling Prior Period Adjustments
• Tracking contract management terms, provisions, and dedications
• Calculating tier-based fees/POP percentages

That last one is pretty ironic since POPs are what led us to adopt a plant accounting software package, but we were still working in Excel.  Stuff like that is what forces users to cut bait or fish.

Pick the right tool for the job.  We decided to pick a better plant accounting tool.  But there are many examples of where solutions fall short, like our natural gas measurement software that got 90% of the work done, leaving us to do the rest in Excel.  I once had two spreadsheets for forecasting that cost over a million dollars to develop because the right tool hadn’t come along yet.

Kevin Throneberry, Kevin Throneberry is a Certified Public Accountant with 30 years of accounting and information technology experience including auditing of various industries and 13 years accounting and management with a midstream oil and gas company. Co-leader of Section 355 Tax-Free Spin of the company reducing tax liability by 150 million dollars. He recently secured one of the top three multiples for mid-stream sales and mergers. Kevin has extensive knowledge and skillset in W Energy Software mid-stream products, TIPS Gas Processing, QCM Contract Management, PGAS Gas Measurement, and IBM Cognos.