Council of Petroleum Accountants Societies Denver, Colorado April 18, 2012

Financial Management Updates Data Mining Future

Financial Management Updates Edits  Affect on adjustment reporting  Federal Gas Pricing edit Paper  Reporting  Checks Negative 2014’s Inspection Fees

Precision ONRR DATA ACCURACY EFFORTS Up-Front System Edits Data Mining Missing Reports, Volume Comparisons, LVS/GVS, High Level Analyses of Sales Values, Royalty Values, Adjustments, etc. 1 Month 6-9 Months 2-3 Years 7 Years (Fed. oil & gas) Compliance Reviews Audits Timeline Risk-based Approach Enforcement Actions

Data Mining Current Focus  Agreement reporting  Missing reports High Volume discrepancies  Net negatives  Same volume, value, Btu  Trending

Data Mining Statistics  Volume comparison team $347,000 in FY 2010 $2,900,000 in FY 2011 $6,800,000 in FY 2012 (through 3/31/12) Many amended 2014’s  Office of Enforcement involvement in future

Data Mining Adjustment Monitoring Team  $.5 million FY 2010  $2.1 million FY 2011  $1.1 million FY 2012 (through 3/31/12)  Numerous cases closed for valid adjustments  Started to look at net negatives $200,000 in collections to date (through 03/31/12)  Just started to look at repetitive reporting

Data Mining Implementation Work Group New edits (September 2012 estimate)  OINX - Do not allow allowances in index zone  Flag $/MMBtu values which significantly differ from the corresponding index zone price  OGOR inventory  Misreporting of DWRR Codes on OGOR

Data Mining Implementation Work Group New Data Mining dashboards  Reporting anomalies.  Approvals for venting and flaring.  Duplicate adjustments  Chronic over sufficient royalty estimates and other misreporting.  Net negatives across royalty equation  Overlapping agreements including the % of overlap  Repetitive reporting  Reported royalties later reversed to zero  Adjustments after closed audit periods

Future Pricing  Data Mining  Edits

Financial Management Questions?