Corvelle Drives Concepts to Completion EPAP Compliance Guidance

Corvelle Drives Concepts to Completion Agenda  Who is Corvelle  Review of AER’s EPAP  Impact on Operators  Operators Preparedness  Implementation Approach 2

Corvelle Drives Concepts to Completion Corvelle Profile  Consulting firm focused on the oil & gas industry – Experience with oil & gas spanning more than 20 yrs – field data capture, production accounting, financial accounting  Management consulting, data management & IT – Project leadership – Process review & redesign – Data quality & integration – Facilitation 3

Corvelle Drives Concepts to Completion What is EPAP?  E nhanced P roduction A udit P rogram (EPAP)  New AER approach to auditing compliance with AER directives and requirements  AER Objectives: – Raise level of compliance on measurement & reporting – Raise level of assurance on measurement & reporting 4

Corvelle Drives Concepts to Completion Risk of Noncompliance  EPAP goal is to reduce noncompliance  Requires operators to identify areas of risk where there can be noncompliance  Ensure controls are in place to mitigate risk of noncompliance 5

Corvelle Drives Concepts to Completion Controls 6 6 Business Processes Volumetric Data Process Measure, Record & Report Control Evaluate Control Evaluate Control Evaluate Control Evaluate Control

Corvelle Drives Concepts to Completion Nature of Controls  Company level, Facility level  Manual vs. Automated  Preventative vs. Detective  Frequency of Controls 7

Corvelle Drives Concepts to Completion EPAP Components 8 Compliance assessment process Operator evaluations of controls Declaration process Action item process D019 Enforcement

Corvelle Drives Concepts to Completion EPAP Impact on Operators  Operators need to understand: – Areas of risk of noncompliance – Controls – Organizational processes related to EPAP – Volumetric data flow through their organization – Measurement  Apply Resources  Act, Develop, Implement & Review 9

Corvelle Drives Concepts to Completion Some Perceptions by Operators 10 Operators believe they currently have few controls. Do controls already exist? Potential of increased operating costs with no potential benefits. What are some benefits? There are costs to implement EPAP. Is there any ROI?

Corvelle Drives Concepts to Completion Options for Implementing EPAP 11  Do nothing – Submit declaration only  Do minimum using existing staff – Review as part of normal operations – Conduct small projects focused on key areas  Pursue detailed implementation – Comprehensive review and implementation

Corvelle Drives Concepts to Completion Operator Actions  Production / Operations – Identify areas where there is a risk of non-compliance – Identify & implement controls to mitigate risk – Evaluate effectiveness of controls  Revenue / Production Accounting – Identify areas where there is a risk of non-compliance – Identify & implement controls to mitigate risk – Evaluate effectiveness of controls  Audit Group – Assist in evaluating & strengthening controls  Senior Management – Review / approve annual evaluation plan & results – Issue declaration 12

Corvelle Drives Concepts to Completion Recommended Approach 13 Conduct initial assessment Develop controls & evaluations Scope & plan implementation Carry out pilot project Company wide implementation

Corvelle Drives Concepts to Completion Estimating Effort 14 Estimating FactorLowMediumHigh Formal business processesYesSomeFew Comprehensive controlsYesSomeFew Processes & controls standardizedYesSomeNo Currency of meter calibrationsCurrentModerateSome Amount of rework & amendmentsSomeModerateLots Operated facilities10%50%100% Volumetric noncompliance report errorsNoneSomeLots AER field inspection findingsNoneSomeLots Number of acquisitionsNoneSomeLots Staff turnoverNoneSomeLots Compliance assessment scoresLowModerateHigh EPAP Action ItemsNoneSomeLots

Corvelle Drives Concepts to Completion EPAP Compliance Guidance 15 Corvelle Consulting 300, Ave SW Calgary, Alberta T2P 0L6 Phone: (403) Web: