How Does It Flow From LDO? Tim Leake September 26, 2003

Objective This session focuses on the setup of Land Division Order records analyzing the interface and data flow with Revenue, and Contractual Management and subsequently the creation of marketing division orders in Revenue. Also addressed is how ownership changes affect the interface between Land Division Orders, Contractual Management, and Revenue.

Agenda Overview of data set up and data flow Review modules and their interfaces Changes to data Common Errors Troubleshooting & Hints

LDO Issues/Building LDOM Determine if it is appropriate to build your division of interest based on multiple tracts (leases, common ownership, unit tracts, etc.) or a single tract to represent the entire spacing unit Build as many tracts as necessary MMS tract requirements –For each well associated to an RMS Lease/Agreement, the AID number must be associated to the LDO Tract where the MMS is the only Royalty owner Disproportionate burdens PPI (Oklahoma) Excess Royalty (Arkansas) Revenue receiving flag properly set?

LDO Issues - Continued Are tax and contract exemptions associated to owners properly? How taxes/contract charges are distributed Contract exemptions on WI owners not supported by Excalibur based on standard component logic Build LDO Division of Interest Unit Acres and update to Well Master Royalty Basis required for MMS wells Interface flag set to either Revenue, Contractual Maintenance (SS), or BOTH Copy your LDO record Historical record of original setup After payout setups Create Working Interest Groups on mass changed record

Data Flow from LDO Contractual Management Land Division Orders Revenue Gas Contracts/ Accounting Gas Balancing Build Contractual WI Groups (LDO400) Build REV DOI From Contract (SS130) Build/Update Revenue DOIs (LDO350) RMS

When to Interface to Revenue Create Revenue Division Orders directly from the Land Division Order module when: No split marketing Non-operated wells without gas balancing You own an Overriding Royalty Interest or Royalty Interest only

When to Interface to Contractual Management Create Revenue Division Orders through Contractual Management when: Using Gas Balancing – operated/non-operated Not accounting for 100% of WI owners (WI owners are taking in kind) Disbursing burdens for TIK owners –PPI Interest (Oklahoma) –Excess Royalty (Arkansas) Multiple contracts on one property One owner selling under multiple contracts

Data Example In the following slides we will review a simple data set up to follow the data flow from LDO to Contractual Management to Revenue. Contractual Management Land Division Orders Revenue

LDO Data Data created in LDO prior to interfacing to Contractual Maintenance

Contractual Management How data is input into Contractual Management The Build Contractual WI Groups process (LDO400) is run after LDO records are built and filed –LDO400 systematically creates One Working Interest Group for each Working Interest Owner – each owners WIG contains his proportionate share of the burdens tied to his interest in LDO An ENTitlement contract with the same effective date as the associated LDO records and with a WIG for each WI owner associated to it Contractual Maintenance (SS112) is completed manually –One set up per contract with WIGs for each selling WI owner

Interface from LDO to Contractual Management Resulting report from Build Contractual WI Groups

Contractual Maintenance Entitlement Contract Systematically built from Build Contractual WI Groups

Contractual Maintenance Manual set up required in Contractual Maintenance /

Revenue Division Order Resulting Division Order after running Build Rev DOI From Contract /

Changes affecting Contractual Maintenance Any change to a purchaser will require a change to the Contractual Maintenance screen (SS112) A new purchaser should get new contract Do not change purchaser on existing contract in the Contract Master –Spot Contracts and Revenue decks have been created with the Purchaser ID on the records, changing the Contract Master will cause the records be out of sync Do not change purchaser on Revenue DOIs created from Contractual Maintenance –Similar to above, changing the Revenue DOI causes the Revenue deck to be out of sync with the Contract Master and Spot Contract file Changes in marketing arrangements will require new setups in Contractual Maintenance but will not require changes in LDO May result in Revenue DOIs with dates that do not tie back to effective dates of LDO records

Changes affecting Contractual Maintenance - continued Any ownership change in LDO will cause a change to the Entitlement contract All DOI Mass Changes that affect LDO records interfaced to SS require Build Contractual Maintenance WI Groups (LDO400) to be run –For Royalty/ORRI changes if they are made as Current/ALL run LDO400, then no further action is required in Contractual Maintenance –Working Interest Owner changes should be done as New and require updates to Contractual Maintenance (SS112) –When new setups are done in SS112 because of new ownership effective dates or contracts, Build Revenue DOI from Contract (SS130) must be run to create Revenue decks –Build/Update Revenue DOIs (LDO350) should be run for all changes

Changes affecting Contractual Maintenance - continued When processing the DOI Mass Change, you will be prompted: To update the gas balancing cumulative from the assignor to the assignee, enter Yes, else enter N The Gas Balancing Cumulative Calculation process will read the flag and move the cumulative accordingly –Creating LDO records manually without introducing new Working Interest owners via a mass change will confuse Gas Balancing

DOI Mass Change (LDO300)

Resulting Report from Build Contractual WI Groups N = New group created U = Unchanged, n o new group created E = Expired, g roup no longer valid for effective date, but the group remains for prior effective dates C = Changed, n ew group created with updates

Resulting ENT Contracts in Contractual Maintenance Original 06/01/2003 ENT contract has been expired by LDO400

Resulting ENT Contracts in Contractual Maintenance New 08/01/2003 ENT contract created via LDO400

Changes Required to SS112 First expire old contract the day before new contract takes effect Note: After entering an expiration date, the Revenue DOI is automatically updated with this date.

Changes Required to SS112 Then create new contract with appropriate WIGs on effective date of the change

Resulting Division Order record in Revenue /

Build Update Revenue DOIs (LDO350) updates all inside Revenue decks Inside decks are all revenue decks built from LDO (or built in Revenue, then interfaced to LDO via LDO290) If initiating a record for the first time, this process creates a Revenue DOI corresponding to LDO revenue interest. If migrating a change from LDO to revenue LDO350 will update all inside decks - decks that are built from LDO (or built in Revenue, then interfaced to LDO via LDO290) LDO350 updates all inside decks by stripping out all owner related information (owner id, type interest, pay code, component, interest, etc.) From the revenue DOI and rebuilding it based on the way the record appears in LDO A record that is built from LDO should never be updated manually in revenue How LDO Updates Revenue Decks

LDO350 calls the process Update to Outside Decks (LDO355) LDO355 updates all outside Revenue decks Outside decks are all those decks that were not generated from LDO (All decks built from Contractual Management, or decks manually built in Revenue and not taken to LDO via Build LDO from Revenue [LDO290]) LDO355 evaluates all outside decks to ensure the criteria of the change is met (i.E. The wells being affected, the owner exists on the revenue deck, with the appropriate interest, etc.) And updates the individual line items (owner id, type interest, pay code, interest) Care should be taken when manually updating outside decks in revenue How LDO Updates Revenue Decks

1) When a mass change contains data in the Rev Rcv column 2) When a mass change contains data in the Ex Tax column 3) When a mass change contains data in the Ex Ctr column 4) When a mass change is run from one interest type to another (i.e. from Working Interest to Overriding Royalty) 5) When a mass change is done at a tract level When does LDO not update Revenue Decks?

When data exists in any of these columns (1-3) (4) If transferring from one interest type to another Or (5) if a change is done on a tract basis There are 5 instances, from a mass change done in LDO300, where LDO355 will not update an outside deck.

When does LDO not update Revenue Decks? For each of the prior occurrences, the warning will be generated: LDO355 update to outside decks not supported for change LDO*1234 This may require the manual update of outside Revenue decks If you are making owner or pay code change on same session with one of the above – that change will also not be completed Always review your Warnings and Errors from the LDO350 process. Failure to do so can result in incorrect disbursement, dissatisfied royalty owners and management

What order do you run the interfaces? The type of change you are performing will tell you what order to run the processes Changes affecting Working Interest Owners: Run DOI Mass Change (LDO300) to affect change against the LDO record(s) Run Build Contractual WI Groups (LDO400) to affect the change against Working Interest Groups and ENT Contract Update affected spot contract(s) in Contractual Maintenance (SS112), with new/updated Working Interest Groups Run Build Revenue DOI from Contract (SS130) to create new Revenue Division Orders Run Build/Update Revenue DOIs (LDO350) to clear screen of LDO record

What order do you run the interfaces? Changes affecting Royalty Interest Owners: Run DOI Mass Change (LDO300) to affect change against the LDO record(s) Run LDO400 to affect the change against Contractual Working Interest Groups and ENT Contract –No further modifications need to be made to Contractual Maintenance Run LDO350 to affect the change against the Revenue deck(s) If a process is run out of order! This will not cause corruption of data. Worst scenario is if LDO350 is run prior to SS130 for a WI type owner change. –You will end up with an extraneous Revenue deck.

Common Errors in Data Set Up/Processing Errors that will cause problems in Contractual Management or Revenue Incorrectly setting revenue receive flags particularly for TIK owners and their burdens Not setting up all the burden information you have available – subsequent acquisition of TIK owners interests can be tedious Tax and/or Contract Exemptions not properly set on owners Manual changes to Contractual WIGs particularly as to receiving flags will be overwritten by subsequent mass changes Working interests changes sent through Contractual Maintenance are not followed through with appropriate spot contract changes and new DOI'

Preventative Measures What you can do to prevent errors New setups thoroughly reviewed before transferring to other modules Mass Changes – review before and after to insure valid results Always heed warnings/errors issued by the system Create procedures for error corrections Communicate – your error can cause issues in other modules (Revenue, Gas Accounting, Gas Balancing, etc.) Always correct data at the source

Troubleshooting Hints Review data set up prior to interfacing to Contractual Maintenance to ensure: Tax/Contract components are correct Revenue received flags are correct Develop Queries to review your data before and after DOI Mass Changes to review your Contractual Maintenance data to compare the resulting Revenue deck to the initiating LDO record

How Does It Flow From LDO?