Joint Interest Billing, or JIB, is form of accounting specific to the oil and gas industry. Because the industry can be high risk, high reward, it’s common for different parties to invest in a single drilling project. Shareholders within the joint venture have different responsibilities and privileges. A JIB statement divides the expenses and revenue from a drilling project among the partners, based on the agreement in place.
Operator and Non-Operators
There are two main types of players in this arrangement: the operator and the non-operator. These parties enter into a joint operating agreement that outlines the rights and responsibilities of each party. The operators usually have the largest investment in the venture and make the day-to-day decisions related to the site.
The operator performs the drilling of a site, receives the initial profits from the project and manages the upfront expenses. The revenues and expenses are recorded by the operator and then divided out to the non-operator partners in a JIB statement.
Operators process JIBs each month as part of their accounts payable workflow. They also must respond to compliance reviews performed by non-operators.
Non-operators are parties that have a vested interest in the well. A non-operator at one drilling site is often an operator at another site. Non-operators receive a percentage of the profit based on their share of the investment.
Challenges with JIB accounting
From the explanation above, you can tell that JIB is a complex process.
It’s so specific and specialized, operators often have an accountant on staff that specializes in JIB accounting. JIB statements can be several pages long due to the complexity of these arrangements. If an operator must print and mail these JIB statements to all working interest partners, the print and mail costs will quickly add up. Also, there’s a chance these statements could be lost in the mail.
From Paper JIBs to Digital
Due to these administrative challenges, most operators and non-operators manage their JIB statements online using JIB management software. This allows both sides of the exchange to optimize the entire JIB workflow to be more efficient, easily scale operations and gain better visibility into cash flow. EnergyLink, a cloud-based solution by Enverus, helps operators reduce support time by providing owners and partners secure and convenient online access to their ACH electronic deposit, change of address (COA) self-service and monthly oil and gas statements – including revenue check detail, 1099 tax documents and JIBs. With workflow automation, enhanced communication tools and rich reporting capabilities, EnergyLink is the industry standard for JIB exchange and automation.
Are you an operator or non-operator looking to optimize your JIB workflow? Join the rest of the industry in using EnergyLink for a more efficient and economical way to process JIBs.
Email us at [email protected] or call us at 1-800-242-4245 to learn how to get started.
Latest posts by Susie Yuill (see all)
- Prepare Your Royalty Owner Support for Tax Season - December 2, 2020
- Oil & Gas Consulting: Outsource Strategic Planning to Rake in Cost Savings - November 16, 2020
- What is Joint Interest Billing (JIB) in oil and gas accounting? - November 6, 2020