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IFS BOLO and IFS ProCount Workflow

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Setting Up Owner Level Pricing Workflow

This workflow explains how to configure IFS BOLO if you have an owner(s) on a Revenue Disbursement Deck with requirements (such as court settlements to Royalty owners) that can only be charged a maximum for specific deductions. Note that IFS BOLO always starts calculating Deduction at a Well level. To configure IFS BOLO for this situation, you will need to apply the offset to the Royalty Owner Deduction(s) to the Working Interest Owners of record.

The IFS BOLO screens you will need to use are listed below:

• RV1115 - Revenue Component Maintenance

• RV1117 - Component Formula

• RV1213 - Revenue Cost Center

• RV1240 - Revenue Contract

When creating components and owners, be sure to use a meaningful naming convention. This will ensure easy recognition and maintenance.

IFS BOLO recommends using a prefix on all new components and owners with:

• The same acronym followed by the Contract followed by the Well followed by the Owner.
  Example: RFNDContractWellOwner

Once set up, each FORMULA will only need modifications if or when Royalty or Working Interest NRI changes.

To set up owner level pricing:

1. In IFS BOLO on the RV1115 Screen:

• Create a new component with a meaningful name and abbreviation, the same as or similar to the following recommendation: RFND

• Create a second new component with a meaningful name and abbreviation, the same as or similar to the following recommendation: RFN.W

2. IOn the RV1117 Screen:

• Create a formula to calculate the net owner correction.
  Example 1: If an owner has been exempted from all deductions solely for purposes of correcting calculations without a potential credit entry then the contra / offset to this adjustment is typically corrected to the Working Interest owner. Their formula will typically look like this:

• The component value calculated MUST be for an Owner Net Adjustment and NOT a Well Level Adjustment.

• The purpose here is to calculate a Negative component adjustment for this owner. The assumption is that he has been overcharged through his share of the existing components and we need to credit back to him the amount he is over the cap. This assumes he has interest in all the above components.

• Create a formula where the components are not printed on the check or ACH remittance detail. This approach eliminates questions where consolidating a single Component deduction amount.

• If the accumulation of specific component deductions is less than 50% of QTY2 (MMBTU in this case) then do nothing - 0

• If the accumulation of specific component deductions is equal to or greater than 50% of QTY2 (MMBtu in this case), then calculate the cap. (QTY2 * .5) {Cap} - Sum of all Deductions, for that specific owner.

• The .03292936 is that Owner’s NRI {found by running RV1234 for specific Contract, Well, Effective date}. If that settlement owner happens to have Royalty and Override interest in this deck you would add the specific interests into one summarized total for this calculation purpose. Instructions further down will explain later when that will get split back out.

• If the Royalty owner has been given a credit (Royalty Owner was overcharged via components) bring their accountability back to whole by creating an offset against the Working Interest Owner(s). The Working Interest calculation 'also' uses the Royalty NRI.

• The WI owners are absorbing the RI correction and NOT their own proportionate share of the component(s) to create the offsetting Component amount. This is why the Component Sharing exemptions on the contract or deck cannot be used.

• For the judicial and legislatively mandated component amount thresholds, the amounts charged and corrected (RI and WI) must be based on the RI interest.

3. On the RV1213 Screen:

For the RFND RI owner calculation his rate is 100% of the calculated component RFND. IFS BOLO has already calculated his share of the cap refund and now you are just stating he should get 100% of that calculation. If his interest had been split across different interest types you would proportion each interest type here accounting for 100% of total.

• Assign your new components and formulas using the Contract Specific CPTs sharing button.

4. On the RV1240 Screen:

The Component sharing is done by setting the Alloc type to S for special sharing. This type of assignment requires 100% assignment of the calculated component sharing. Since there is only a small subset of the total ownerships this will not be their NRI. Instead it will be their NRI proportionate to 100%.

• Assign your new components and formulas using the Contract Specific CPTs button.

• On Tab 4 - Net Ownership verify the NRI is resolved and used correctly in the formula.

You should see something similar to the following:

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To calculate their proportionate interest:

• 66520038 / (.05548412 + .66520038) = .92301191

• 05548412 / (.05548412 + .66520038) = .07698809

5. Enter Sales and Allocate to Owners:

• Start the valuation process on AV2315 - Sales Valuation

• Start the Gross Sales process on RV2301 - Upload Oil and Gas Sales

• Verify sales vouchers on RV3311 - Oil and Gas Sales Voucher Edit Report

Creating a Revenue Distribution Formula

To manage Revenue Disbursements, you might have to maintain multiple components to add or subtract from the Gross Value of individual Disbursement Transactions. To minimize the data entry from Allocation Valuation, you can define components through a formula.

• Component Formulas are created on the Component Formulas screen (RV1117) and referenced as the Calculation Basis for Allocation Valuation on Contracts (AV1244).

• Component Formulas include a reference to an Allocation Valuation Indexed Rate.
  An AV Rate is the CODE referenced within the Component Formula.

The workflow to create a revenue disbursement formula includes the following steps:

1. Create a Component – on RV1115

2. Create an Allocation Valuation (AV) Rate – on AV1224 (or AV4224)

3. Reference the AV Rate on the Component Formula – on RV1117

4. Reference the Component Formula in the AV Contract – on AV1244

To Create a Component (RV1115)
On the Revenue Component Code Maintenance screen (RV115), keep these guidelines in mind when creating your components:

• Setup a Component for each RATE desired

• Create meaningful Component Names and Abbreviations for disbursement checks

• Rates will be used at the Contract level within Allocation Valuation processing

• Identify Regulatory requirements for Regulatory cross-references

• Determine regulatory and business rules to ensure rate is eligible to adjust Gross Value

• Identify code needed for CDEX (Check Remittance)

To Create an Allocation Valuation (AV) Rate (AV1244)

1. If you don't have anAV Rate Pricing Method set up yet, go to Price Method Maintenance (AV1220) and create one.

2. On the Pricing Contract Maintenance screen (AV1244), open the contract for the AV Rate you want to use.

3. In Price Method, select the dynamic pricing formula you created on AV1220.

To Reference the AV Rate on the Component Formula (RV1117)
Set up your formula in RV1117 to calculate the specific rate. The component value calculated can be for a single rate or a group of rates used in a single formula.

For Example: ~D.PROD.QTY1*~D.CFORMULA.LF

Use the terms in Table 1 to understand what is being calculated in the example:

In this example calculation:

• Allocation Production volumes come from WELL.PROD (AV1301)

• Unit of Measure is defined as QTY1 (Mcf or BBLs from AV1201)

• Calculation Formula reference to dynamic rate index (AV1224)

• Rate CODE from AV1224

To Reference the Component Formula in the AV Contract (AV1244)

Now that you have created the component calculation, you can reference that formula within the Calculation Basis on the AV Pricing Contract.

1. In IFS BOLO, on AV1244, open the contract for the AV Rate you used when you created an allocation valuation rate.

2. At the bottom of the screen, click Contract Specific Components and then select the formula you created on the Component Formula (RV1117) screen.