PJVA Coffee Discussion

Operating Forecasts – Why we need them, or do we?

Operating Forecasts

• Current obligations under our Operating Agreements (Unit and Facilities) regarding Operating Forecasts are being ignored.

• An Operating Forecast is not a Budget.

• It is a tool for Operators to convey information to Owners to show they are a diligent Operator

Operating Forecasts

• As we operate on a monthly basis consider tieing the expenditure limit to a floor above which an Operating Forecast for approval is required.

• Example: – Expenditure limit is $50,000– Annual authority would be 12 months x

$50,000 or $600,000 above which an operating forecast is required.

Operating Forecasts

• Turnaround Costs– Require separate approval unless the AFE numbers

and amounts are attached to the forecast for approval

• Third Party Fee Income and Current Fees must be included and basis of operating fees

• Operating DOIs must be included and basis of calculation.

• Property Taxes should be a flow through cost to be included in the operating cost base for TP fees

Operating Forecasts

• Monthly or quarterly information is not required, annual is sufficient

• Detailed info per Functional Unit or Segment should include:– Labour and Vehicles

• All chargeable employees supporting maintenance and operations– Electricity– Property Tax– Fees paid– Trucking– Disposal– Environmental Taxes (GHG, Carbon etc)– Overhead– Fee Income

Operating Forecasts

• Volume information to be included– Production, Injection, Disposal and Product

volumes as applicable– Fuel, flare, vent volumes

Operating Forecasts

• Previous years forecasted and actual expenses and volumes included with variance explanations.

• Operators are acting on behalf of Owners and are compensated with the Overhead they collect.

• Owners receiving this information annually have a degree of trust that the Operator is acting diligently and fulfulling his obligations as Operator.

Operating Forecasts

• End of life operations (remediation and reclamation) which continue over a year should be included in the operating forecasts with the annual expected cost and AFE # for informational purposes.