Calculation sequence

Calculations in FINANCIALS are split into eight distinct phases, as shown in the image below. These phases are designed to provide the user with a flexible platform on which to design fiscal calculations. Each of these phases has a different intended purpose. Of the eight calculations, the user has direct access to four in the Regime modeling environment: Pre-Calculation, Before Economic Limit, After Economic Limit and Post Calculation. The other four phases (two Depreciation, Calc WI Shares and Determine Economic Limit) are controlled by the application.

Note: The order of the calculation of the net partners is arbitrary. We do not know which partner will be calculated first. As such, the repeated numbers indicate calculations that are interchangeable in order.

The first phase is the Pre-Calculation phase. During this phase, all modules are calculated in one pass. This phase is the place where the user can set up calculations. Here production, revenue and costs are generally calculated.

The Non–Abandonment Depreciation phase is the first of the depreciation phases, and calculates the all of the non-abandonment depreciation pools defined in the Regime. Abandonment pools are indicated by the Treat as Abandonment\Salvage box in the depreciation pool settings on the Capital tab of the Regime. Depreciation calculations are performed annually, unless the depreciation method selected from the library has the built-in functionality to allow the user to define a different calculation setting in the settings of the depreciation pool.

The next phase is the Before Economic Limit phase. In this phase the modules are calculated once for every time period and for each partner for that time period. Here the periodicity used is the Regime periodicity set on the General tab of the Regime. This phase is used for all before-tax fiscal calculations such as royalty, cost recovery and profit oil.

The Calculate Working Interest Shares phase is performed once only after the first three phases have been calculated for the gross partner. The calculation is performed in this order so that the user can define working interest reversions based on a gross variable if required, e.g. trigger a working interest reversion after the first MM$10 of exploration capital has been spent, or the first 1 MMBbl of product have been produced. Working interest is calculated monthly.

Next is the Determine Economic Limit phase. Here the calculation engine determines the economic limit from the indicated variable and partner set in the project. All variables that are not required for any post-economic limit calculation are truncated, and variables that are to be shifted to economic limit (e.g. abandonment) are shifted. The economic limit is calculated at Regime periodicity.

In the Abandonment Depreciation phase, all non-abandonment depreciation pools are recalculated, and the abandonment pools are calculated for the first time. Again, depreciation calculations are performed annually, unless the depreciation method selected from the library has the built-in functionality to allow the user to define a different calculation setting in the settings of the depreciation pool.

The After Economic Limit phase is also calculated once for every period and for every calculation partner, with the Regime periodicity. This phase is used for after-tax fiscal calculations and final cash flows.

The Post-Calculation phase is similar to the Pre-Calculation phase in that all time periods are calculated in one pass. This phase is used for finalization of calculations. This phase is used for entitlement and reserves, aggregation of special cash flows, creation of standardized reporting overlays, and so on.