JVSA and its Offshore Audit Services

by | Feb 6, 2023 | PKF Texas - The Entrepreneur's Playbook®, Insight-Post

Do you know what an offshore audit is? What’s involved and good to know about this important client service? Joint Venture Strategic Advisors (JVSA) President Kirsten Streick and Senior Vice President Brian Baumler, CPA, go into detail about offshore services.

Russ: This is the PKF Texas – Entrepreneur’s Playbook®. I’m Russ Capper, and I’m here with Kirsten Streick, President, and Brian Baumler, Senior Vice President of Joint Ventures Strategic Advisors. Kirsten, Brian, welcome to the Playbook.

Brian: Thank you Russ. Thanks for having us.

Refresher on JVSA

Russ: Let’s start at the top. Brian, tell us about JVSA.

Brian: Sure. JVSA is a joint venture services firm. We have operations in Calgary and in Houston with teams in both locations. Focus primarily on North America, but we also have activities internationally. We’re industry agnostic, meaning we can serve just about any industry that has a joint venture opportunity that needs a look.

However, we are focused predominantly on energy and energy-related businesses with operations both onshore and offshore. Representing predominantly the ownership interest of the non-operated parties within these joint ventures.

About Offshore Audits

Russ: I’ve had couple of visits with you guys in the past, and it seems like it’s a thriving business right now, but I’ve never heard offshore before. Tell us about what you do offshore.

Brian: Well, for offshore companies, obviously there’s onshore producers, there’s offshore producers and operators, and the joint venture relationships – whether it’s onshore or offshore – are virtually the same. However, there are some things that make them very unique.

One thing that’s very different between the two is logistics. And you can’t just walk up to a platform and touch it. You actually have to try to get out there somewhere. And companies are delivering goods and services and people to and from locations. And oftentimes the platforms are in clusters. It’s not just one location; it’s several. And in the process of doing so, you’re using helicopters, you’re using boats, and all these good and services are loaded on those means of transportation to get them out to these locations, which makes it a little bit tricky.

So how do you allocate the cost? And that’s really the main thing – very expensive to use this means of transportation. So again, where our interest is to represent the underlying parties just to make sure everybody’s sharing in those costs and expenses equitably within the joint account of the operation.

The Offshore Team

Russ: Do employees of JVSA ever end up offshore?

Brian: I personally have not been on one actually, but I’ve had a number of clients have offshore activities and operations. But Kirsten, on the other hand, I think we have had team members.

Kirsten: We have, yes. And it’s been quite the experience to be out there in the Atlantic Ocean in the middle of nowhere.

Russ: So, when JVSA first started, were you doing offshore in the very beginning or did that evolve over time?

Kirsten: Well, the offshore on the east coast of Canada has been part of our business from the get-go. So, we’ve been doing that; we’ve been assisting our clients with the audits out in Eastern Canada.

Russ: Wow. So, actually, it sounds based on what you said, Brian, it sounds like it’s much more complicated than an onshore company.

Brian: Oh, yeah. I would say it is. And then another thing that makes it unique is… since the Offshore Horizon spill, for an example, they now have emergency response teams that are needed and available in case there’s a spill. Sometimes those assets are owned by the corporations, sometimes they’re owned by cooperatives, they’re all based onshore, they have to be taken out to location. So again, another activity that becomes very expensive at the time when an incident does occur.

Russ: Okay, does it end up where you have staff that’s specialized in offshore?

Kirsten: You need to be specialized in knowing the accounting procedures that allocate the costs to the joint venture partners. So, that’s where the uniqueness comes in. They’re very different depending on where you’re auditing – if it’s Gulf of Mexico, if it’s Canada, if it’s international – they all have their own accounting procedures that govern the costs.

Offshore Procedures

Russ: Okay. So, it’s interesting you mentioned the Horizon spill, that must have changed everything that even you look at when you’re giving and advising and offshore company, right?

Kirsten: Yes. A lot of companies have specialized training now on the emergency procedures and how to evacuate from the platforms when emergencies happen. You might have a blowout or you might have a spill, and you want to be able to get the employees off that platform safely.

Russ: I thought the procedure was just run and jump. So, does JVSA have suggested procedures, or do you audit what their procedures are to make sure that they would work?

Kirsten: We audit the procedures that are already in place, and we look at the cost of these companies that are providing the training.

Russ: And as always takes place in a JVSA, you’ve got multiple parties, and so you kind of have to make sure that they share the expenses appropriately.

Kirsten: Yes. It’s very important that the costs are allocated correctly to the joint account because they are very specific to this offshore operation, and we want to make sure that all the non-operators are accounted for correctly.

Brian: And where it really makes a difference at the end is one owner in one location may not be an owner in another. So, if the cost is not put into the right place, then one owner may bear the burden unnecessarily on the joint account for expenses that may or may not relate to them at all. So, we’re focusing on what the interest of the joint account and the parties associated with that agreement.

How Insurance Plays a Role

Russ: But it seems like insurance must play a role too. Does it?

Kirsten: Yes. Insurance is a big-ticket item because the premiums are very large and they’re very specific premiums that are for offshore, especially the environmental sensitivities that can occur. So, they have specific premiums for those in place. So, we have to make sure that, again, like Brian said, that all the owners are sharing in the cost appropriately because not everybody is an owner in the same well or platform.

Russ: And I guess appropriately could be defined several different ways. There might be people that have people on the platform that therefore insurance would be proportionally higher in companies that don’t have people there. Or am I over complicating it?

Kirsten: No, you’re absolutely right. There’s a lot of variances out there and scenarios that come into play with insurance.

Russ: When you’re sort of auditing a joint venture, do you often get into a bit of controversy and disagreements between the people? Or do they usually just look at whatever you say and say, “Yeah, that’s the way we’re going to do it?”

Kirsten: It’s not always black and white. There are definitely some gray areas, and the clients… they look at what we suggest, and we always audit to the accounting procedures. However, sometimes there are those gray areas, and when that happens, we make suggestions and then they work with the operator in order to understand and come to an agreement.

Brian: Yeah. And a lot of things have evolved over time. These joint ventures a lot of times may have been put in place 20 and 30 years ago. So, they’re using a stale document that because of evolving technologies and things of that nature, now all of a sudden, we’ve got costs that were never contemplated. So how do you address those on a go-forward basis with the individual underlying non- operated interest owners and to the joint account for the benefit of the joint venture agreement?

Russ: So, it sounds like JVSA’s services for offshore should be really in demand; it sounds more important than onshore even.

Kirsten: It’s very important to get the offshore accounting correct. And we’re here to help.

Russ: Alright. Great. Thank you both for spending some time with us today. For more about this and other topics, visit JVSA.com. This has been another thought leadership production brought to you by PKF Texas – The Entrepreneur’s Playbook®. Tune in next week for another chapter.


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