Domestically and internationally, over the years, Navigator has conducted countless joint venture audits; the scope of which includes capital, operating and production for drilling wells, units and facilities both offshore and onshore.
Some of the more complex custom audits that have been conducted by Navigator include payout audits for penalty wells, convertible overriding royalties and casing point elections. In addition Navigator has audited extensively, 13th month adjustments as they relate to plant throughput adjustments or other functional units. Excess capacity calculations are also reviewed and verified to the terms of the applicable CO&O. Navigator has also conducted audits of heavy oil and oil sand projects. Projects that have been covered in these audits include SAGD wells and pads, up-grader plants and multi-pad directional wells. Two other types of audits that Navigator has extensive experience in are NPI (Net Profits Interest) and NCI (Net Carried Interest) audits which are commonly defined in heads of agreements or other specific agreements. A sample of some of the agreements that are typically reviewed by joint venture auditors are as follows: Joint Operating Agreements, Farm Out Agreements, CO & O Agreements for facilities, Unit Agreements and Unit Operating Agreements.
Vendor / Compliance
Navigator has conducted numerous audits of vendors on behalf of oil companies both domestically and internationally.
The vendors are comprised mainly of oilfield service & supply companies who provide a variety of products and services to the oil companies. The scope of these audits was to verify specific compliance to contracts and agreements between the parties. During the verification process, a comprehensive review of employee timesheets, product pricing, delivery tickets etc. is conducted. The costs were scrutinized and compared to the vendors’ invoices to the client. Examples of some of the typical Vendors who we have audited include drilling companies, equipment suppliers, engineering contractors, travel companies and service companies. For a period of approximately seven years, Navigator, through a foreign subsidiary WANAV (a Cyprus corporation), was under contract to the Government of Equatorial Guinea, West Africa to conduct audits of every service and supply company who were providing products and services to the oil industry in the country. The scopes of these audits were income tax, payroll tax and contract compliance with the oil companies they serviced. Some of the vendors who we audited included for example Halliburton, Weatherford, MI Drilling Fluids, Schlumberger and related companies etc. The audit scope in some cases exceeded $100,000,000 for a one year period. Navigator personnel have performed forensic audits on behalf of clients that were related to targeted vendors in Canada. The audits mainly related to inventory controls. This involved physical inventory counts onsite, tracking specific material going through the company's inventory system as well as auditing the inventory control systems. Physical inventories were conducted to complete the audit process. In a very few instances Navigator has conducted vendor audits whereby the targeted vendor was not notified in advance of the audit and the auditors simply showed up at the vendor’s offices unannounced. This was carried out pursuant to the directions of the client. The purpose of this strategy is to not allow the vendor time to massage or destroy any records that would be reviewed by Audit.
PSC (Production Sharing Contract)
Navigator has conducted numerous audits of PSC (Production Sharing Contract) costs and recoveries on behalf of foreign governments.
The audits typically cover the full spectrum of costs and revenues that comprise a Production Operation Cost Account that has been filed by Contractors in conjunction with their partners in country. Navigator personnel have conducted intense reviews of these costs and confirmed that they were charged in accordance with the terms set out in the production sharing contract and all amendments to the contract. The government royalties are also audited to ensure compliance to the PSC. Revenue or liftings are audited for compliance to the PSC as well and this area can be extremely complex when the government takes their royalty as well as their share of profit oil in kind. This leads to issues relating to entitlements as well as a host of accounting issues. For a period of approximately seven years, WANAV (a subsidiary company of Navigator) had a contract with the Government of Equatorial Guinea to conduct PSC and fiscal audits of every contractor and subcontractor working in the country in the oil and gas sector. The two principals of Navigator led most of the audits and were instrumental in initially securing the contract.
Navigator has conducted numerous fiscal audits on behalf of foreign governments.
These fiscal audits that have been conducted by Navigator have focused on withholding tax compliance as well as payroll tax and income tax. These audits are full blown financial audits starting with income tax returns filed by companies, reconciling the returns to the general ledgers of the companies and verifying the various aspects of costs and revenues as they comply with the income tax act of the country.
Navigator has performed numerous audits of Final Statements of Adjustments (FSOA) pursuant to Purchase and Sale agreements relating to oil and gas asset acquisitions. Due diligence audits have ranged from $5,000,000 to more than $3,000,000,000.
One of the largest due diligence audits that was performed by Navigator to date, was the multi-billion dollar Apache acquisition of BP Canada's core assets. From an audit perspective, this involved leading a team of nine auditors for a period of two months. The audit scope included change in Operatorship and transition period adjustments in addition to the main cut-off audit. In addition to the prior noted audit, Navigator also sent auditors to Cairo, Egypt to audit the FSOA for the Apache acquisition of BP’s Egyptian assets.