Prior Period Adjustments: An Unfortunate Necessity

Kyle Blair Written by Kyle Blair

Prior Period Adjustments: An Unfortunate Necessity

While we all like to think our production, division order (“DO”), revenue, or regulatory departments are running at peak performance, delays, mistakes, and revisions to production statements regularly occur during monthly processing. From volumes/DOIs being late for use in processing to a reversal of numbers when keying in a check total, updates, revisions, and mistakes can occur.

Although some PPAs are reversed and corrected immediately, some require further investigation. This extended period of research tends to occur at the same time a department is trying to process their next month’s volumes, so naturally, a continual backlog occurs.

Opportune completely understands the headaches that a large list of historical PPAs can create. We’re more than capable of working to make sure that backlog becomes history. First purchasers and operators alike need assistance reconciling their sales, either from calculations on the production side of the house or with final sales statements handled by revenue. Having an entire team working around the clock to get operators, royalty owners and regulatory agencies corrected information provides an immeasurable value to clients.

One of the benefits of having a full-service back-office outsourcing department is access to industry experts across the spectrum of volume and value processing. Specifically, with PPAs, Opportune can provide accounting assistance in four key areas where PPAs regularly occur:

  • Production
  • Division Order
  • Revenue
  • Regulatory


Obtaining daily and monthly volumes accurately measured from the wellhead to the back-office already requires a Herculean effort; that is when everything goes right. Because we don’t live in a perfect world, volumes reported to accounting are often either untimely or incorrect.

As an operator, whether it be a field issue involving plates/meters, an incorrect new well allocation set up in the system, or something as simple as fat-fingering a value on an oil ticket, volumetric PPAs are very common. Due to the granular level of detail required to confirm the accuracy of a statement, the revision process between operator and purchaser involving pipeline and plant statements rarely begins and ends in the same accounting period. Being able to confirm product content (e.g. volumes, gross processing margins (or GPMs)) for liquids, pressure bases for gas, etc.), as well as location accuracy (PAD tie-outs, new producing wells accurately added to allocations, etc.), often take time to get right, not only as an operator but also as a first purchaser.

As a first purchaser, you’re paying the operators and issuing sales statements as part of the normal routine. However, in many cases, you might also carry the burdens of distributing royalties and handling regulatory functions on behalf of those operators. It’s crucial that should the need for adjustments arise, they’re handled timely and accurately as operators depend on those sales to pay their royalty burdens and other financial obligations. Run ticket adjustments such as receiving updated tank strappings, being provided with the corrected beginning, or ending gauges, or simply attributing a run ticket to the wrong tank are monthly occurrences.

Opportune is very familiar with these types of monthly issues and understands that just because you were able to process volumes through distribution, the work for that production period is most likely not finalized. By integrating with the production team, we work side by side with clients to address any reversal and rebooking necessary, from field volumes and statements through to royalty check distribution and volumetric regulatory reporting.


Confirming representative divisions of interest (“DOI”) match the associated leases of a property is already a daily struggle. Hearing six months later that a royalty owner was paid (or not paid at all!) incorrectly is something so common that there’s an owner relations department in place to resolve these specific issues. Guaranteeing accurate payment of royalties for both working and royalty interest owners is paramount in a monthly accounting close cycle and having accurate DOI for each property is critical to getting this done.

Opportune Outsourcing has a fully functional land department consisting of lease records, land and title analysis, as well as DO technicians and supervisors available to help clients review DOs and to confirm accuracy.


No matter the origination of a PPA, they all eventually flow downstream into the hands of the revenue accounting department. While production and DOI changes will clearly require reversals and rebooking through revenue processing, some PPAs are directly generated from the revenue department. Contractual issues involving pricing, deductions involving cost-and tax-free scenarios provided to the DO team, and any contractual take-in-kind (“TIK”) gas balancing scenarios are all generally found by the revenue department in conjunction with marketing and the DO teams.


Like production volumes, revenue revisions are an activity that happens daily. Updated contractual terms, special owner pricing, or revenue updates (i.e., suspense, escheat, tax/deduction considerations, etc.) as an outcome of a legal dispute are all common monthly revisions that take place in an accounting period. Analysis of historical owner-property level transactions associated with an owner’s check involving a potential PPA requires detailed due diligence to find the cause as well as a solution to remedy and rebook the appropriate solution.

By working with the client to understand their typical monthly revenue revisions, as well as the root cause for the need, not only can Opportune handle the backlog of revenue PPAs but we can build a road map for our clients on how to handle them when they show up in the future.


As a PPA nearly always influences the volume or value of a property, it’s not uncommon that a state or federal property PPA is required. Not only does this require a reversal and a rebook of the property in question, but it also requires regeneration and refiling of the associated state or federal filing. Our regulatory department is keenly familiar with filing in most states involving active drilling, as well as federal issues involving the U.S. Office of Natural Resource, including unbundling deductions.


Given the active nature of the transactional market in the energy sector, a common scenario Opportune continues to encounter involves clients with historical data in the database/format of one legacy software platform, but they’re currently using a completely different solution in real-time. Mergers or full acquisitions often require a client to take on the full responsibility of transactional history going back to an agreed-upon time frame. This archived data (i.e., historical volumes, DOIs, contracts, owner level transactions, etc.) is frequently required to generate a PPA that spans such a time frame.

Together with Opportune LLP’s Process & Technology and its Transactional Advisory teams, Opportune Outsourcing utilizes its historical knowledge of energy software platforms with the technical capability to:

  • Extract required data from archived legacy databases.
  • Translate historical formatting into current required formatting.
  • Upload translated data (depending on capabilities, using upload/interfaces, or journal entries).
  • Reprocess both the reversal and correction in the client’s real-time system.


At Opportune, we understand that this backlog tends to weigh heavily on a department looking to have a clean slate by the end of a quarter or year. Having the industry and technical knowledge across systems allow us to offer a customized solution to process a backlog of PPAs simultaneously with a client’s monthly, quarterly, and/or yearly calendar. By partnering with Opportune, our clients can feel comfortable knowing that their PPA backlog will be wiped out on time and accurately.

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