In the corporate world, compliance with the Sarbanes-Oxley Act of 2002 (or “SOX Compliance” for short) invokes a feeling of dread and perhaps a touch of fear. Born from scandals such as Worldcom, Tyco, and Enron, the intent of the Sarbanes-Oxley Act is simple.

SOX is intended to enhance corporate transparency and to hold officers of publicly traded companies accountable for having appropriate controls and for reporting the effectiveness of those controls. That is where the simplicity ends, especially as it relates to applying the SOX format to oil and gas measurement.

The Application of SOX to Oil and Gas Measurement

SOX controls are something that goes beyond the accounting department and financial officer of an oil and gas company. While there is nothing about hydrocarbon measurement standards in that original Sarbanes-Oxley Act of 2002, there are a few key phrases to be mindful of:

• Officers are “responsible for establishing and maintaining internal controls.”
• Officers must “design such internal controls to ensure that material information…is made known to such officers.”

This covers a lot of ground. In oil and gas, we call custody transfer measurement the “cash register of the company,” which means that the “cash register” gets a lot of attention from the people responsible for designing the controls.

This is why companies need to ensure that their measurement standard operating procedures (SOPs) support SOX audit compliance. When this is connected and supported by SOX compliance software tools, then companies will find themselves on the path to SOX compliance.

The Situation: Reconciling Differences in Measurement Controls

The SOX measurement controls for one company may not be identical to the measurement controls of another.  The consultants and audit firms that develop each company’s controls must consider that company’s unique requirements and corporate structure.

What makes the difference is how companies proceed once the controls have been defined.

In our experience supporting companies, there are two approaches. Let’s review the historically inefficient approach, then we will present a better alternative.

– Some companies are reactionary. What often happens is companies wait for negative (bad) audit results, then have knee-jerk reactions on how to “fix the deficiency” in their controls.

On top of what is already being done to meet contract requirements and standards, new procedures are added to address specific issues found in the audit. Work is often duplicated in the name of compliance. This can result in a huge workload being placed on measurement analysts, managers, and technicians in the field.

In our experience, we have seen cases where measurement technicians had to review a separate printed report for each meter, then sign off that the measurement was correct and that they had reviewed the report. This creates a massive pile of paper that must be retained.  Companies quickly end up with a lot of new procedures just for SOX compliance:

• Techs in the field have extra steps added to their already heavy workload.
• Analysts see an increased workload for extra verification and signoffs.
• Managers find themselves with hundreds of extra documents to manage every month.

Then, when it comes time for the next SOX compliance audit, a massive effort is often required to compile the documents the auditors need. Auditors may spend weeks pouring over the documentation. Meanwhile, everyone holds their breath wondering if they will pass the audit, knowing that if deficiencies are found, it will mean more new steps and sign-offs in the future.

– GCI has a better way. Let’s review the better approach through Natural Compliance.

Natural Compliance: Tools to Support the Audit

Consider a scenario instead where everything works in unison — where measurement SOPs, training, and software help you naturally achieve compliance and realize efficiencies.

– When your measurement SOPs are designed so that SOX-required controls and the requirements of your contracts/tariffs are aligned, then you can minimize and even eliminate extra steps and tasks. Then, generating the SOX-required control documentation becomes part of your normal day-to-day workflow.

– You can also offer measurement training to support the SOPs. This creates assurance that your people understand not only how they are supposed to do things a certain way, but why it is important to do it that way.

– We can then help you marry your SOPs and reports into one software platform through Muddy Boots. This way, you become efficient using SOX compliance software tools to track progress and report issues — well before the auditor arrives for the audit.

Consider the benefits of our approach:

• Workflow is efficient and well-organized.
• The time required to document measurement at the end of each month is reduced.
• You gain clarity that all of the audit steps have been followed and all of the controls have been met because your normal daily and monthly reporting is optimized.
• When it comes time to audit the controls, you will know that you are in compliance.

We offer a compelling combination of measurement SOPs support, measurement training, and field operations efficiency through the Muddy Boots all-in-one field operations platform. By leveraging our offering, you can achieve Natural Compliance with SOX requirements.

– Contact us today to schedule a consultation about how we can support your oil and gas company through our tools. We would appreciate the opportunity to speak with your team.