Malone Petroleum Consulting



Joint Venture Auditor Report Findings Normally Exceed Any Audit Cost

Do you need a joint venture auditor?

To answer this question, you should ask yourself some questions to start:

  • Is the operator refusing to return your calls or emails?
  • Is your gut telling you that there is something dreadfully wrong, and you better check it out?
  • Was the AFE overspent, and now you are stuck with an enormous bill?
  • Did you have a previous audit with little to no results and want a second opinion?
  • Is the 24 month limit almost over which will result in the loss of your audit rights forever?
  • No. None of these. I just know that audits are usually very profitable, especially if a lot of them are done.

If you answered "yes" to any one of these questions or fall in the last category, you may be a great candidate for an audit.


Before jumping on the bandwagon, it's a good idea to educate yourself on the who, what, when, and why of the joint venture audit review process. If you already know all the ins and outs and want more information directly from me, feel free to drop me an email or give me a call.

So, what is a joint venture audit review exactly?

A joint venture audit review, technically a "joint interest audit review", consists of an examination of all significant charges and credits to the Joint Account. The review is conducted for the purpose of verifying transactions and resulting charges reflected on the Operator's joint interest billings.

Learn more about the correct use of Joint Venture Audit

A review is conducted on a test basis of Non-Operator advances, lease purchase costs, lease operating expenses, payouts, production volumes, and revenues only if adequate review time is available and/or there is applicable oil and gas production.

Why conduct an audit?

  1. Verify transactions and resulting charges reflected on the Operator's joint interest billings.
  2. Errors are always present. In good times or bad, the joint venture audit review improves profitability by recovering and precluding overcharges.
  3. Valuable information can be made available to the investors about the Operator. The investor can better determine which Operators are making the best attempt to deal fairly with the investors.
  4. Vendor reviews help keep honest vendors honest.
  5. Joint venture audit review improves profitability by recovering and precluding overcharges.

Who can initiate a review?

Any non-operator can initiate a review. Typically, a working interest owner will ballot other non-operating working interest owners to join in the review, sharing its costs.

What does Malone Petroleum Consulting do during the audit?

In a quick summary, we are joint interest auditors who:

  • Perform sufficient test checks.
  • Review procedures to assure that the Operator satisfactorily maintains the accounts and supporting records.
  • The charges and credits are reviewed and considered for reasonableness and proper inclusion in the Joint Account.
  • Items considered to have a lack of impact are reviewed on a selective basis.

How is your company different than a public auditor?

  • Public auditors are employed specifically by the Operator for the Operator's benefit.
  • Public auditors have full access to the Operator's records and personnel.
  • Public auditors almost always have totally different training and expertise.

See Professional Training and Education at MPC

Desk Audits Just Can't Find All the Errors.
  Desk Audit Malone Petroleum Consulting
Advances not refunded
Before/After Casing Point  
Bill Codes  
Coding errors  
Credits not received  
Cutoffs missed  

What are the guidelines?

The examination is made in general accordance with guidelines established by the Council of Petroleum Accountants Societies (COPAS) Bulletin number 3 (Expenditure Audits in the Petroleum Industry).

Learn more about joint account review compliance and expenditures

Who is responsible to follow up?

It is the ultimate responsibility of the Non-Operators to follow up on all exceptions, unless we are specifically paid to handle the follow-up work.

Pressure exerted by the individual or collective Non-Operators is far more effective than any from our company. Once the Non-Operators have been granted credits by the Operator, each Non-Operator should make certain their individual credits actually appear on their joint interest billings.


As an oil and gas auditor with over 40 years of joint venture auditing experience, Malone Petroleum Consulting has reclaimed tens of millions of dollars for our clients. However, the question is "Can we help YOU?". Learn more about Malone Petroleum Consulting.

If you said "no" to all the initial questions above and are still reading, then you may be one of several types of people.

  1. You are reading for information.
  2. I still haven't answered your questions.
  3. You find this page downright entertaining.
  4. You might really need or want an audit.
  5. No. None of these.

Since you're still reading, I have more things for you to think about to determine whether or not you should have an audit.

  • Does the operator have a bad reputation in the industry and could care less if you sue them?
  • Are the expenses being charged not chargeable per contract and are being charged anyway?
  • Are the expenses far greater than expected and getting worse?
  • Do the revenues make absolutely no sense and you are probably being underpaid?
  • There is a fraud or lawsuit possibly, but you want to check it out first.
  • It is virtually impossible to send an operator to jail for stealing – the incentive is too tempting.

While you are contemplating these thoughts, should either the Non-Operators or Operator ever have any questions or need additional information, please do not hesitate to call on us any time we can be of service.

We do the very best job we can in a very limited time, and we greatly value all feedback, both positive and negative, both Operator and Non-Operator. We are committed to both achieving excellence and providing the best and most fair report possible.

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