Joint interest billing is a specialized form of accounting used in the oil and gas industries. Due to the high costs of onshore and offshore drilling, companies combine their capital resources to minimize the financial risks involved in exploring, developing, maintaining and producing mineral properties.
Companies enter a joint operating agreement that outlines the rights and responsibilities of each company. The JOA also designates one company as the operator and the remaining companies -- investors -- as the non-operators. The operator typically has the largest investment and makes routine decisions related to the property.
The operator incurs all direct and indirect costs for operating the property and receives all revenue from sales of the oil or gas. Costs incurred may include labor, repairs and maintenance, overhead and the costs of materials and supplies. The operator is responsible for billing the non-operators each month. JIB includes charging costs and distributing the revenue to the non-operators, based on the contractual agreements.
The operator provides the non-operators with a monthly billing summary statement listing the properties and the associated revenues and expenses charged to the non-operators, as outlined in the agreement. Detailed statements reflecting itemized expenses and revenues are also provided.
Many software packages for large and small companies offer JIB systems. The software provides tracking, allocation and invoicing of expenses and revenues to non-operators according to the percentages and terms outlined in the contract. The system generates entries, tracks the properties by owner, and nets expenses against revenues. It also creates the summary and detailed monthly revenue and expense statements that the operator is required to submit to the non-operators.
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