Global energy statement of capabilities - PwC€¦ · Auditor market share of global energy...
Transcript of Global energy statement of capabilities - PwC€¦ · Auditor market share of global energy...
PricewaterhouseCoopers 1
GlobalenergystatementofcapabilitiesDeliveringvaluewithindustry-focusedservices
GlobalIndustriesEnergy
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ItappearstheworldiscomingoutoftheGreatRecession.Basedontheincreaseintransactionsintheoilandgasspace,companiesseemreadytoputtheeconomicdownturnbehindthem.
Oilpriceshavesomewhatstabilized,butnaturalgaspricescontinuetobelow.Energyanalystsandprofessionalsalikewouldcertainlybenefitfromacrystalballthatcouldpredictwhatcommoditypriceswilldo,notonlyintheshort-term,butoverthedecadestocome.Mostindustryprofessionalsandobserversrealizethatasthesupplyofoilandgasbecomesevenhardertofindandaccess,priceshavetogoup.Butthequestionremains,whenwillthatbe?
Strategyandlongrangeplanningareevenmoreimportantintoday’suncertainenvironment.Oilandgascompaniesmustcontrolcosts.Theywillcontinuetoweightherisksversusbenefitsofnewprojects,newproductsandhowmuchcapitaltoinvest.Behindsuchdecisions,thereareregulatory,safetyandenvironmentalconsiderations.Balancingtheneedtosupplytheworldwithhydrocarbons,companiesareconsideringinvestmentsinalternativeenergysources.Technologyisdrivingbreakthroughsinbothhydrocarbonsandnewenergysources.Unconventionalhydrocarbons,suchasshaleoilandgas,bitumenandcoalbedmethaneareexpandingthesupplyofoilandgas.
Thecostofcarbonisbecomingareality.Newregulationsarebeingdiscussedaroundtheworldasgovernmentsgrapplewiththebestwaytoreducecarbonexposure.Energycompaniesmustbepreparedtodealwithcarbontaxesorcapandtradesystemsnomatterwheretheyoperate.Untilaglobalcarbonpolicycanbeagreedupon,thecomplexityofmeasuring,controllingandreportingcarbonwillhavetobemanaged.
AtPricewaterhouseCoopers,wearenotonlywatchingthesedevelopmentsintheindustry,butweareanalyzingthesechangesfromtheperspectiveofhowtheywillimpactourclients,andhowwecanbesthelpcompaniesprepareandmanagethechanges.Ourprofessionalsunderstandtheissuesthatourclientsface,andhavetheknowledgeandexperiencetoproactivelyaddressthesechallengesandrecommendthebestsolutions.Weexaminetheissues,andbuildteamsofsubjectmatterspecialistswhodevelopappropriatesolutionsthroughourassurance,taxandadvisoryservices.Forglobalclients,ourexperiencedteamsareonthegroundin151countriesaroundtheworldcontributinglocalinsightandunderstanding.
PwCistheworld’sleadingadvisortotheenergyindustry,workingwitheverysegmentofthebusiness—fromupstreamtomidstreamtodownstream—toprovidebusinesssolutionstailoredtomeetyourneeds.Weexcelinservingoilandgascompaniesbecauseofourskills,experienceandteamsofindustryspecialists.Formorethan100years,wehavehelpedenergycompaniessucceed.Welookforwardtotheopportunitytoworkwithyourcompany.
AlanW.Page
GlobalEnergy,Utilities&MiningLeader
Introduction
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Atthecoreoftheindustry.Attheforefrontofdevelopments.Deliveringvalue.
PricewaterhouseCoopers 5
Introduction 2
Specializedservicesforenergycompanies 4
IndustrychallengesandPwCsolutions 11
Whatmakesusdistinct 18
Globalenergyteamcontacts 20
Contents
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PricewaterhouseCoopers (PwC) has been adding value by providing professional services to energy companies for more than 100 years. We help companies confront the industry’s most challenging issues and changes by developing effective solutions and strategies.
Energycompaniesarefacinganincreasinglycomplexenvironment,withchanginggeopolitics,tighteningregulatoryrequirements,greatercompetitionandhigherstakeholderexpectations.Findingnewreservesrequiresgreaterinvestmentandimprovedtechnology.Internationaloilcompaniesalsofacegreatercompetitionfromnationaloilcompanies,astheglobaldemandforenergycontinuestogrow.Thegrowthofrenewableenergysourcesandunconventionalhydrocarbonsishelpingdeliveradditionalenergysources,butcompaniesmustweighthecostsassociatedwiththesesources.Whileneedingtoinvestmore,energycompaniesarealsolookingforwaystoimproveefficiencyandlowercosts,whilemanagingthemanyrisksofthebusiness.
PwC32%
KPMG20%
EY19%
DT16%
Not disclosed5%
Other8%
Auditor market share of global energy companies $10B+
Source:Hoover’sOnline3Feb2010
PwCcanhelpenergycompaniesevaluatepriorities,assessrisks,andbuildstakeholderconfidence.Ourglobalenergypracticefocusesondeliveringprofessionalservicestocompaniesofallsizes,acrossallsegmentsoftheindustry.Weprovideindustryspecificsolutionsinthefieldsofauditandassurance,tax,dealsandconsultingservicestohelpcompaniesaddresstheirbusinessandstakeholderissues.
AuditandassurancePwCauditsenergycompaniesinallsectors—includingnational,international,upstream,midstream,downstreamandoilfieldservicescompanies.Ourauditmarketshareoftheenergysectoris32%.
Energycompanieswantauditteamstounderstandtheirissuesandbusinesschallengeswhenanalyzingtheirfinancialperformance.Ourdedicatedenergyprofessionalsreceivespecializedtraining,includingregularupdatesonregulatoryandtechnicalissues.Thistrainingisaugmentedbybothinternalandexternalindustryevents,whichbringsourpeoplethein-depthknowledgethatallowsPwC’senergyprofessionalstowalkandtalktheindustrywiththeirclients.
Financial statement auditsForpubliccompanies,theannualreportisthekeycommunicationtoolforshareholdersandthepublicat-large.Transparency,evidenceofstrongmanagementcontrolsandadherencetoregulationsareallcomponentsofthefinancialstatementaudit.PwCauditorsaroundtheworlduseasingle,globalauditmethodology,fullycompliantwithInternationalAuditingStandardsandapplicablenationalstandards.Ourgloballyconsistentapproachtotheauditmeansthatregardlessoflocation,PwCpeopleunderstandandevaluateyourbusinessusingasinglelanguageandcommonmethods.Inturn,thatgivesyouauniformlevelofqualityinallouraudits.Thismethodologyalsoenablesustoquicklyorganizeanddeploythekindsofmultinationalauditteamsoftenrequiredbyourlargerenergyclients.
Specializedservicesforenergycompanies
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PwCauditteamsholdannualAuditPlanningWorkshops,inwhichmembersoftheteamfromaroundtheworldgatherforaface-to-facemeeting,toplananddiscusstheaudit.Theclient’sChiefFinancialOfficerorControlleroftenattendsthesemeetingstoshareanyconcernsandlearnaboutparticularchallengesinvolvingstaffing,regulatorychanges,timing,etc.
Representative Audit and Assurance ClientsAllianceOilCoLtd.BGGroupplcBP-TNKCanadianNaturalResourcesCentricaplcChemoilEnergyLimitedChesapeakeEnergyChevronCorporationChinaNationalPetroleum
CorporationCHSInc.CompañiadePetroleos
deChileDCCPlcDongEnergyE.ONAGEcopetrolS.A.EmpresasCopecS.A.EnbridgeInc.EnCanaCorporationExxonMobilCorporationFederationofMigros
CooperativesGasNaturalSDG,S.A.GazpromNeftTradingGmbhHellenicPetroleumS.A.HutchisonWhampoaLimited
KenyaOilCompanyLimitedKinderMorganEnergyPartners,
L.P.KoçHoldingA.S.MarathonOilCorporationNaborsIndustriesLtd.NesteOilOyjNewfieldExplorationNipponMiningHoldings,Inc.NovatekOAOOAOGazpromOando(Nigeria)PlcONEOK,Inc.PlainsAllAmericanPipelinePlainsExploration&ProductionRoyalDutchShellplcRWEAktiengesellschaftSaudiArabianOilCompanySchlumbergerLtd.SHVHoldingsN.V.SimeDarbyBerhadS-OilCorporationSuncorEnergyInc.Transneft’AKOAOTechnipWoodGroupWorldFuelServicesCorporation
Inadditiontoauditingfinancialstatements,weofferafullrangeofassuranceservicestoenergycompanies,coveringareassuchasstatutoryaudit,regulatoryrisk,Sarbanes-OxleyandInternationalFinancialReportingStandards(IFRS)compliance,independentreviewofsystems,controls,andprocesses,andadviceonacquisitions,alliancesanddisposals.Weareleadersindevelopingnon-financialperformancereporting,helpingourclientsrespondtotheneedforgreatertransparency,andimprovedcorporategovernance.Wehelpcompanieswithsustainabilityissues,includinghealth,safetyandenvironmentalprograms.Regulatory compliance and reportingForallorganizationsengagedinactivitiesthatcomeunderthecontrolofaregulator,PwCprovidessupport,advice,andassurancetohelpyoumanageregulatoryrisks.Inanever-changingregulatoryenvironment,we
helpensurethatyouidentify,manage,andcontrolanyexistingandfutureregulatoryrisks.Ourteamsconsistofexperiencedregulatoryriskspecialists,includingformerregulatorswhoknowtherules,andhaveimplementedandassessedmultiplecompanycomplianceefforts.Ourpeoplecanhelpyouatthestrategiclevel,identifyingwaystominimizethecostsandpotentialdisruptionstoyourbusinessthatcanstemfromregulations,whileensuringfullcompliance.
Sarbanes-Oxley complianceForallSecurities&ExchangeCommission(SEC)registeredorganizationswhomustcomplywiththerequirementsofsection404oftheSarbanes-OxleyAct,PwCprovidesarangeofservicestohelpyouachievecompliance.Ourservicesincludeprojectmanagementassistance,technicalsupport,riskassessmentsandscopingactivities,assistingindocumentationandevaluationefforts,training,qualityassurance,andreview.Fornon-auditclients,wecanalsoprovidedirectassistanceintheevaluationandremediationofcontrols.
IFRS reportingPwChasaproventrackrecordinhelpingcompaniessuccessfullycompletethetransitiontonewaccountingstandards.Understandingthecomplexityofsuchchanges,webuildteamswitharangeofspecialiststoassistyourcompany’sconversiontoIFRS,including:technicalaccounting,treasury,tax,humanresource,mergerandacquisitions(M&A)valuationsandprojectmanagementspecialists.OurprovenIFRStransitionmethodologyhashelpedmorethan200companiesthroughoperationalproblems,focusingoneffectiveknowledgetransfertoensurelastingbenefits.
UnderIFRS,thereislittleguidanceontheaccountingforexploration,developmentandproductionofminerals,oilandgas.Recognizingtheneedforfurtherclarification,theIASBundertookaspecialstudyofextractiveindustries,andinAugust2009,issuedadraftof“The Extractive Activities Discussion Paper”asafirststeptowardsanIFRSfortheseactivities.AteamofourglobalenergyspecialistswhofocusonextractiveindustriesworkedwiththeIASBinitseffortstodraftthesestandards.Weprovidedinputregardingissuessuchasdefinitionsofreservesandresourcesforfinancialreportingpurposes,thebasisforrecognizingmineral,oilandgasassets,initialandsubsequentmeasurementofmineral,oilandgasassets,andrelateddisclosures.
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The U.S. Securities and Exchange Commission revises how companies disclose reserves
OnDecember29,2008,theSECreviseditsdecadesolddisclosurerulesforreportingoilandgasreserves.Underthenewrules,oilandgascompaniesareabletodisclosepossibleandprobablereserves,whereastheywerepreviouslylimitedtoonlyreportingreservesthatwereproven.Companiesalsocantreatnon-traditionalresources,suchasoilsandsandshaleoil,asoilandgasreservesinsteadofminingreserves.Inaddition,companiesreportingreservescannowuseanaveragecommoditypricebasedupontheprior12-monthperiodratherthanhavingtouseyear-endprices.ThesechangescameintoeffectonJanuary1,2010.
Capital market transactions and initial public offeringsForcompaniesseekingtoraisedebtorequitycapitalinthecapitalmarkets,PwCcanprovideanindependentviewofthecriticalissuesinvolvedinaccessingaparticularcapitalmarket.Ouradviceistailoredfortheoilandgasindustry,thesizeandcomplexityofthebusiness,andthescopeofthetransaction.Forcompaniesconsideringgoingpublic,orspinningoffpartoftheirbusiness,wehavetheexperienceandexpertisetopositiontheentitytogopublicandthentakeanactivepartinmakingtheeventsuccessfulwhenithappens.
Internal audit servicesMaximizingthevalueandeffectivenessoftheinternalauditfunctionrequiresanunderstandingofanorganization’sobjectives,risks,riskmanagementpriorities,regulatoryenvironment,andthediverseneedsofcriticalstakeholdersincludingexecutivemanagement,theboard,employees,andshareholders.Byadvisingandassistinginthedevelopmentofinternalauditandriskmanagementmethodologies,wecanhelpimprovethequalityandeffectivenessoftheinternalauditprocesses.
AdvisoryServices/ConsultingOurconsultingservicesutilizeourdeepfinancial,analytical,industryandbusinessprocessskillstoprovideenergycompanieswiththeadviceandassistancetoimprovestakeholdervalue,buildtrustandboostperformance.Aroundtheworld,organizationsengageustohelpthemcaptureopportunities,navigateriskand
deliverlastingchangeacrossbusinessnetworks.
Ourconsultantsbringtogetherafullrangeoffunctionalandindustryskillstohelpyouinthisenvironment.Wetakethetimetolistenandhavethecouragetodebatedifferentpointsofview—basedonindependentandchallenginginsights,supportedbyfactsandindustrybenchmarks.Inparticular,wehelpclientsto:
•Buildeffectiveorganisations
•Innovateandgrowingprofitably
•Reducecosts•Leveragetalent
•Managerisksandregulation
•Executebetterdeals•Restructuretroubled
businesses
Achieve GrowthGlobalization,commoditypricefluctuations,supplychallengesandahostofotherfactorscanhindergrowthobjectives.Companiesneedtocreateefficiencies,andfindwaystomaximizetheentirevaluechaintomakethemostoftheirorganicgrowthpotential.Non-organicgrowthisakeyrouteforcompaniesseekingtogainaccesstonewreservesandmarkets,butgeopoliticalandeconomicfactorscanplaceaddeddemandsondeal-making.PwChasabroadspectrumofcapabilitiestosupportcompanies’effortstomanagethegrowththatwillbenecessarytomeettheever-increasingenergydemand.Whetheracompanyisconsideringatransaction,jointventureagreement,productionsharingagreement,ororganicexpansion,ourenergyprofessionalshavetheexperienceanddeepindustryunderstandingtodelivervalueandcontributetoyoursuccess.
People and changeEnergycompaniesfacehugegapsintheirworkforce,dueahighnumberofagingemployees,fewergraduateswithtechnical,petroleumandsciencedegrees,andacompetitivemarketplace.Withmorethan6,000humanresource(HR)professionalsinover151countries,PwC’snetworkhasoneoftheworld’slargestHRadvisoryorganizations.Ourmulti-disciplinaryapproachallowsustoadviseonallaspectsofpeoplemanagement,helpingourclientstocreatevalueanddelivercompetitiveadvantagefortheirbusinessesthroughpeople.Whetheritisassistingwithinternationalexpansion,changeprograms,tacklingskillsshortages,improvingandmeasuringhumancapitalperformanceordevelopingeffectiveremunerationsystems,PwC’sHRprofessionalscanhelp.
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Manage business performanceTheregulatory,shareholderandmarket’spressureonenergycompaniestodeliveryear-on-yearperformanceimprovementisbecomingevenmoreintenseinafluctuatingenvironment.Whatworkedsixmonthsagomaynolongerapplytotoday’scostcontainmentorriskmanagementissues.Fromgettingthemostfromyourownoperationstoimprovinginternalsystemsperformanceormanagingyoursupplychainandoutsourcedrelationshipseffectively,wereallylistentoyourbusinessissuesandworkwithyoutodeliversustainableperformanceimprovement.
Shared services and outsourcingManycompanieshavealreadyoutsourcedtheirITandback-officefunctionsorestablishedsharedservicescentersformajorbusinessprocesses.Companiesarenowoutsourcingcoreactivitiessuchashumanresources,taxandlegalservices,asglobalizationandconnectivityenablenewwaysofdoingbusiness.Therationaleforoutsourcingisthuschangingdramatically;agrowingnumberoforganizationsseeitasameansofobtainingstrategicadvantages,andnotjustasacost-cuttingmeasure.PwC’sspecialistsassistcompaniesbyhelpingidentifywhichactivitiestooutsource,definingyourrequirementsandassessingsuppliers,negotiatingterms,makingthenecessaryinternalchangesandcommunicatingthesetoemployees,managingtherelatedrisks,andmanagingthecontracts.
Embed sustainabilityEnergycompaniesknowthattheymustprovidereliableandaffordableenergy.Manyenergycompaniesaresuccessfullyintegratingsustainabilityintotheiroverallstrategiesbyengagingallstakeholders,developingrobustperformanceindicators,voluntarilypreparingforsustainability,corporatesocialresponsibility,andsafetyandenvironmentalreports,and,insomecases,providingindependentverificationofthesereportstoincreasethetransparencyoftheirdisclosures.PwC’sSustainableBusinessSolutionsteamworkswithenergycompaniestoaligncorporategovernanceandpolicies,operatingsystemsandprocesses,performancereportsandmechanismstomeettheneedsandexpectationsofstakeholders.
Make smarter risk decisionsEnergycompaniesfaceavarietyofrisks,fromgeopoliticsandregulatoryconcerns,toinvestmentandfinancialdecisions.PwCcanhelpclientswithallaspectsofthe
riskcontinuumsuchasregulatoryremediation,integratedgovernance,riskandcompliance,taxeffectiveness,managingcosts,andevaluatingnewopportunities.Wedoallofthisinthecontextofthebroaderriskequationthatenablescompaniestomeetperformanceandriskobjectives,resolveuncertaintyandachievetheirgoals.
Deal with unplanned eventsIntoday’senvironment,businessesneedtoanticipate,preventandeffectivelymanagecriticalrisksthathavethepotentialtocausesignificantinterruptionandgeneratenegativemediaattention.Sometimes,theunplannedoccurs—ahurricanestrikesanoffshoreplatform,aterroristgroupthreatensassetsorpeople,animportantcontractissuddenlycancelled—andbeingabletorespondimmediatelycanmakeallofthedifferenceintheoutcome.PwCcanhelpyourespondtoandcontrolthesituation.Weofferabroadspectrumofservices,withtheabilitytodeployacross-borderteamonamoment’snotice.Frombusinessrecoveryservices,todisputeanalysis,investigationsanddisasterrecovery,PwC’sspecialistscanprovideyouwithdirection,anunderstandingofyouroptions,andanexpedientplanforward.
ForensicsWhateverthecomplexityorurgencyofthesituationyourorganizationfaces,PwC’sforensicspracticecanprovideseasonedsupportandsolutions.Wecombineforensicaccountingandinvestigativeskillstoorganizations(andtheirlawyers)thatarefacingissueswithfinancialandlegalimplications,tohelptomakeintelligent,informeddecisionswhetherintheboardroomorthecourtroom.
Dispute support servicesWeprovidefinancial,economicandbusinessservicestobothlawyersandcorporateclientsgloballywhoareinvolvedinlitigation,arbitration,andotheralternativedisputeresolutionforums.Ourexperiencedprofessionalscanofferassistancewithearlycaseassessment,classcertification,discoveryassistance,quantificationofexposure,claimpreparation,andrebuttalandexpertwitnesstestimony.Whateverthesituation,frombreachofcontractorwarrantytoincomelossesfromtorts,weareheretohelp.
Forensic accounting and analysisCompaniesoftenfaceavarietyofchallengesinimplementingtheirstrategicvisions,executingor
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defendingtheirbusinessmodelsorunlockingthelatentvalueandpotentialofinformation.Supportedbyourstate-of-the-artforensictechnologytools,wecanprovideaclearevaluationoftheproblemoropportunity,optionsfortacklingtheissueandactionplanstoachievetheoptimaloutcome.Weassistclientsinprotectingandmaximizingthevalueoftheirintellectualpropertybyexaminingcompliancewithlicensingagreements.
InvestigationsDealingwithsuspicionsofunethicalorillegalactionsrequiresmuchmorethansimpleknow-how.Itrequiresspeed,sensitivityanddiscretion.Italsorequiresanin-depthknowledgeofthelegalandregulatoryframeworksineachjurisdiction.Weunderstandtheimportanceofreactingquicklyandconfidentiallytoacrisissituation.Weappreciatetheneedtostopillegalactivity,safeguardyourcompany’sassetsandreputation,preventrecurrences,andarriveataresolutionwithaslittledisruptionaspossibletotheregularflowofbusiness.
DealsDealsarecrucialtomanyenergycompanies’strategy,drivenbytheneedtosecuresupply,extendmarketfootprint,orfreeupcashandcapital.Whetheritisafull-scalemerger,orsaleorpurchaseofproducingproperties,orevaluatingoptions,PwCiswellknowninthemarketplaceforourknowledgeandexperienceinalltypesoffinancialtransactionsincludingmergersandacquisitions,valuation,growthordivestments,andexitstrategies.Wefocusonthedealcontinuumfromstrategythroughexecutionandpost-dealintegration,includingfinancialandoperationalduediligence,accessingthecapitalmarketsandvaluing,negotiatingandstructuringdeals.Weprovideadviceontheimplicationsoffinancingprojects,corporatedebt,restructuring,investments,mergersandjointventures.Weadviseonwaystobettermanageassetsandlargecapitalinvestmentsamidstincreasedcompetition,orintimesofuncertainty.Ouradvisorscanevaluatetechnical,operational,marketandfinancialrisks.
TaxservicesGlobal tax servicesTaxregulatoryissuesaretopofmindforoilandgascompaniesoperatingaroundtheworld.PwChasthestrongestinternationalnetworkofanyprofessionalservicesfirm,withdedicatedtaxspecialistsin151countries.Thismeansthatwecansupportyoubothlocallyandglobally,whereveryourequiretaxadvice.Our
globalenergytaxservicesfocusonhelpingourclientsunderstandlocaltaxregimes,anddeveloptaxstrategiesforallofthevarioustaxesthatcomeintoplay,includingroyalties,excisetaxes,value-addedtaxes,etc.Ourenergyprofessionalscanhelpcompaniesdealwiththetaxconsequencesofoilandgascontracts(suchasJointOperatingAgreements,ProductionSharingContracts,manufacturingandmarketingagreementsandfarm-out/farm-inagreements)beingnegotiatedorconcludedwiththegovernmentorco-operators.
International tax structuringOurtaxprofessionalssolvechallengingissues,anticipatechangesthatcanimpactyourtaxsituationandfinancialstatements,andkeepyouapprisedoflocal,state,foreignandinternationaltaxregulationsastheypertaintoyourcompany’soperations.Ournetworkofinternationaltaxstructuringprofessionalscanhelpyoutostructureyourinternationalbusinessinataxefficientmanner,bothlocallyandglobally.Wecanhelpyouconstructeffectivecross-borderstrategiesandmanageyourglobalstructuraltaxrate.Wewillalsokeepyouabreastofnewdevelopmentsintheinternationalarenathataffectyourbusiness.
Global compliance servicesForbothcorporateincometaxesandindirecttaxes,ourGlobalComplianceServicesgroupoffersunparalleledexcellence.Ourapproachtocorporateincometaxcompliancehelpscompaniesseekingbettertaxmanagementacrossanumberofterritoriesorwithmultipleentitiesinoneterritory.Thisisparticularlyrelevantwhenacompanyisenteringnewcountriesorwhereaccountingandfinanceresourcesarebeingmovedintosharedservicecenters.Wehavespecializedtaxcompliancecentersandskilledlocalterritorytaxteamsprovidingqualitytechnicalsupportaroundtheworld.
Corporate secretarial servicesThepotentialrisksofineffectiveglobalgovernanceandcompliancesystemsformultinationalcompaniesareoftennotrecognizeduntilfailureoccurs.PwChasanextensiveglobalnetworkprovidingaccesstocorporatesecretarialspecialistsinover80territorieswhoareinauniquepositiontoadviseandassistclientswiththeirglobalgovernanceandcomplianceneeds,whethertheyareoperatingonasingleormultinationalbasis.PostSarbanes-Oxley,oneofthemajorchallengesfacingmultinationalcompaniesistheneedfortheimplementationofinternalcontrolstoensureeffectivemanagementoflegalentitiesonaglobalbasis.
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Ourcorporatesecretarialserviceofferingisbasedaroundtwokeyprinciples:globalgovernanceandglobalcompliance(legalentityriskassessment,legalentitymanagementandcorporatechanges).Fromtheincorporationofanewcompanyorbranch,theongoingcompliancewithlocallegislationrequirements,totherestructuringofyourglobalbusinesses,ourlegalservicesnetworkisinauniquepositiontoassistyouinensuringthegoodstandingofallofyourlegalentitiesinaccordancewithlocallegislation.
Indirect taxesIndirecttaxes,includinggoodsandservicestaxes(GST),value-addedtaxes(VAT),severance,property,employment,excise,motorfuels,salesandusetaxes,andcustomsdutiesareuniquelyimposedbyavarietyofjurisdictionsandcanbeasignificantburdenforanyenergycompany.Energycompaniesinparticular,duetotheirlargevolumeofcommoditybasedtransactions,canbeexposedtosignificanttaxesontransactions.Ourindirecttaxprofessionalscanassistinfirstdeterminingwhattaxesareimposedbyajurisdiction,whethertheactivitiesofacompanyareenoughtosubjectittothetax,andhowtoeitherstructurethecompany’sactivitiessoastoavoidthetaxorassistincomplyingwiththefilingrequirements.Duetothesignificantdifferencesintaxesandrelatedrulesamongthejurisdictions,itmaybepossibletominimizetheoveralltaxpaidthroughproperplanning.
Tax merger and acquisition servicesEarlytaxplanningformergersandacquisitionsisessentialtoreduceboththeactualtransactiontaxcostsandthelong-termsustainabletaxratefollowingthetransaction.PwChasthelargestnetworkofM&Ataxspecialistsintheworldandwecanofferyouexpertdealstructuringandfinancingadviceatallpointsthroughoutthedealcycle.Wedelivervaluethroughquantitativeanalysis,rigorousimplementationandleadingedgestructuringtechniques,carryingoutpre-acquisitionduediligence,ensuringtaxefficientdealstructuring,andensuringpost-dealintegration.Transfer pricingInter-companytransactionsacrossbordersaregrowingrapidlyandarebecomingmuchmorecomplex.AtPwC,wehaveastronginternationalnetworkofdedicatedtransferpricingspecialistswithadvancedtrainingineconomics,accounting,lawandprojectmanagement,whoarereadytoworkwithyou.Ourindustryandtaxauthorityexperienceanduniquecapabilitiesenableustodevelopinnovativeapproachesforenergyindustry
participants.Thelastfewyearshaveseenasurgeoftransferpricingaudits,atrendthatisnotexpectedtoslowdownanytimesoon.Adecadeago,onlyafewcountrieshadformaltransferpricingdocumentationrequirements.In2009,morethan60countriesdid.Thisnewenvironmentrequiresmultinationalcorporationstotakeproactive,coordinatedstepstounderstandtheirtransferpricingarrangementsanddocumentationrequirements.Risksmustbeidentifiedandaddressed.Disputesandauditsmustbeavoided,managed,andresolved.Allissuesmustbecoordinatedandalignedacrossjurisdictionsbeforetheydevelopintolargerbusinessconcerns.Ourglobaltaxcontroversyanddisputeresolutionprofessionalswillassistyourcompanytoproactivelyevolveinthisrapidlychangingenvironment.
International assignment servicesMostoilandgascompaniestodayoperateinmorethanonecountryorregion.Forthesecompanies,deploymentoftalentisakeytosuccess.Whateverthemission—sharingknowledge,implementingmanagementprocesses,expandingbusinessintonewterritories—assigneesprovidethefuelforglobalgrowth.OurInternationalAssignmentstaxgroupcanhelpcompanieswithensuringthatyourinternationalassignmentpoliciesarealignedwithandmeettheneedsofyourbusinesswhilebeingcost-efficient.Wehelpclientspreparetax-efficientinternationalassignmentstructuresandpoliciesandmanagerisksbycomplyingwiththeregulationswheretheirworkforceisdeployed.
Sustainability and climate change tax servicesWiththegrowingconcernoversustainabilityandclimatechange,andtheregulatoryregimestoaddresstheseissues,PwC’ssustainabilityandclimatechangetaxnetworkhelpsclientswithissuessuchascarbontaxes,environmentaltaxesandregulation.Ourservicesincludecomplianceandincentives,footprintandmonitoring,fundstructuring,transferpricing,humanresources,andpolicyconsulting.OurTax and the environment—a world of possibilitiestextisavaluabletoolforcost-effectiveplanning.Thisstudyprovidesanoverviewofbothenvironmentaltaxesandtaxincentivesrelatedtoenvironmentallyfriendlyinvestmentsandactivitiesandanalysesenvironmentaltaxmeasuresin13majorterritories.
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TheGlobalTaxMonitorrecognizesPwCastheleadingtaxadvisergloballybyreputation,withaverystrongleadoverthecompetition.
Ourreputationasglobalmarketleaderextendstothevarioustaxserviceareas,wherewehaveaverystrongleadoverthecompetitionindomesticandcross-bordertaxcompliance,domesticandinternationalcorporatetaxplanning,indirecttax/VAT,M&A,transferpricing,compensationandbenefits,taxriskminimization,taxaccounting,taxfunctioneffectivenessandexpatriatetaxplanningandcompliance.
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Accesstocapital,risingcosts,pressuretoreducethecarbonfootprint,whethertoinvestandhowmuchtoinvestinalternativefuelsandenergysources,changingdemandpatterns,skilledworkforceshortages,safetyandenvironmentalconcernsandchanginggeopoliticalscenariosarejustsomeoftheissuesandchallengesfacingenergycompaniestoday.Energycompaniesknowthattheirbusinessiscyclical,andthatnewprojectsrequirelongleadtimes.Managingtheupsanddownsofcommodityprices,whiletryingtoremaincompetitiveandsatisfystakeholdersisdifficult.AtPwCwedelivervaluetoourclientsbydeliveringservicesthathelpenergycompaniesaddressthemanychallengestheyfacetoday.
Challenge:Changingmarketdynamics,includingcommodityprices,supplyanddemand,coststructuresEnergyisamatureindustry,butcontinuestoevolveandexperiencechangingmarketdynamics.Characterizedbylongprojectleadtimes,andaboom-to-bustcycle,theoilandgasbusinessrequirescarefulstrategicplanningandlong-termthinkingtoachievesuccess.Oncedominatedbyinternationaloilcompanies,nationaloilcompanieshavebroughtincreasedcompetitivefactorsintoplay.Accesstoeasyreserveshasallbutdisappeared.Nonconventionalplays—searchingforreservesindeepwater,andminingbitumenandshale—aremorecommonintoday’sindustry.Amidstthesemarketdynamics,priceshavecontinuedtofluctuateupanddownindrasticswingsoverrecentyears.
Thereisaclearcompetitiveadvantagetothoseenergycompanieswhocanoperateanefficientbusiness,controllingcostsandfindingwaystoimproveperformance.ThisiswherePwCcanhelp.
PwC ServicesWhencompanieswanttomakesustainablechangestoimproveperformance,theycallonPwCtohelpdesign,
manageandexecuteaprogramtoreducecosts,increaseefficienciesandenhanceoperationaleffectiveness.Usingourdeepunderstandingoffinance,riskmanagement/compliance,ITsystems,operationsandhumanresources,wehelpourclientsidentifyandimplementcostsavinginitiatives,improveprocessesandinternalcontrols,identifyandmanageriskandimprovequality.Wealsouseourprovenexperienceandknowledgetoprovidehands-onassistancetoimprovefinancialunder-performanceandcash-flowmanagement.Ourindustryskillsandunderstandingensuretailoredsolutionstosupportyourresponsetoincreasingregulation,competition,riskandcosts.Someoftheareaswherewecanhelpcompaniesimproveperformanceinclude:
Finance • Maintaining compliance and control:Being
accountabletothebusinessandtothefinancialcommunity,CFOshaveputcomplianceandcontrolonthetopoftheagenda.Formany,responseshavebeentacticalratherthanstrategic.Moredeeplyembeddedandsustainablesolutionsarenowrequired.Flexibilitytorespondtofutureregulatorychangeisalsoincreasinglyimportant.
• Driving efficiency:Thepressuretoreleaseresourcesandcapacityhasneverbeengreater.Gainsmaycomefromtheeliminationofredundantactivities,consolidationsofactivities(forexample,throughsharedservices),standardizationandautomationofprocesses.Thesestepshaveinsomeinstancesresultedincostsavingsinexcessof50percent.
• Providing insight and challenge:Insighttakesdifferentformsindifferentorganizations.Itinvolvesdeliveryofaneffectiveperformancemanagementframework,understandingthekeybusinessdriversandchallengingandsupportingbusinessdecisionsaroundthesedrivers.Equippingfinancetodelivereffectivesupportontheseaspectsrequirestoolsandcapabilitieswhichareoftennewtothefunction.
Findingsolutionstoindustrychallenges
14 GlobalEnergystatementofcapabilities
Technology Toassistyouingettingvaluefromtechnologyinvestments,webringtogethertheskillstodeliverimprovementsinprocesses,aswellastheknowledgeinITstrategy,ITarchitectureanddesign,enterpriseapplications,sourcing,projectmanagementandIToperationsmanagement.Wecanhelpyouwith:
•AligningITtothebusiness•ManagingITcostsandvalue•Sourcingandservicemanagement•ITtransactionservicesduediligence
Governance, risk and compliance Wesupportclientsinidentifying,understandingandmanagingriskandhelpensureanappropriatebalancebetweenrisksandopportunities.Ourspecialistsassistbusinessesindesigningandimplementinggovernanceandcomplianceprogramstoensurethatthecompanycontinuestooperatewithintheboundariesofrelevantlegislationandregulations.Thisincludesbuildingacultureofdoingtherightthing.Areasoffocusinclude:
•Governancesuchasboardandmanagementperformanceandaccountability,orimprovingstakeholderandregulatoryrelationshipsandcommunications
•Enterpriserisk/portfolioriskmanagement•Managingbusinessprocessforcomplianceoutcomes•Compliancemonitoringandreporting•Compliancecostmanagement•Incidentidentificationandremediation
Capital projects and infrastructure Whetherrelatedtoinfrastructure,constructionofanewplant,buildingorsystem,capitalprojectsrequireseparatefinancing,management,governanceandassurance.Thescaleofprojectsintheenergysectorpresentsimmensechallengesatthebestoftimes.Thechallengeofdevelopinganddeliveringcapitalprojectsisfurtherintensifiedasthenatureofprojectsthemselvesbecomesmorecomplexanddemanding.Forexample,manyprojectsneedtobesitedinverydemandinglocationsinordertosourcemoremarginalreservesorgainpermitting.Projectsarealsobecomingmoretechnologicallydemandingascompaniesfactorintheimpactofevolvingtechnologies,suchascarboncaptureandsequestration.Companiesalsohavetocontendwiththeupsanddownsoflaborandskillsavailability.
Theimportanceofoptimizingcapitalprojectplanning,managementanddeliveryiscritical.PwCiswell-equipped
toassistwiththechallengesfacingcompaniesandguidethemthroughthestepstheyneedtotakethroughoutthecapitalprojectcycletoachievethebestoutcomes.Ourhighlyexperiencedspecialistteamsofindustryexperts,engineers,surveyorsandprojectaccountantsworkcloselywithcompaniestoreviewcapitalprojectpracticesthroughouttheprojectlifecycle,includingportfoliomanagement,governance,projectmanagement,riskandqualitymanagement,procurementstrategies,supplychainmanagementandmanagementreporting.
Issue:Sustainability,climatechangeandsecurityofsupplyAcrosstheglobegovernmentsandconsumersalikearecallingforasecureenergysupply.Indevelopingeconomies,energyissynonymouswitheconomicgrowth.Indevelopedeconomies,energycompaniesarecalledupontosupplyacleanfuelsource,readilyavailableatareasonableprice.Inbothdevelopedanddevelopingcountries,energycompaniesfaceanincreasinglycomplexenvironment.Newreservesarebecomingmoredifficulttofindanddevelop,withsomeregionsoff-limitsduetonationalism,environmentalissues,warorterrorism.Alternativeenergysourcescantakeyearstobringonline,andareoftenmorecostlythantraditionalhydrocarbonresources.
PwC servicesOurglobalenergypracticeincludesover3,100professionalsin151countriesaroundtheworld,providingourclientswithon-the-groundresourcesineverymajorenergycenter.Suchglobalreachallowsustokeepourclientsbetterinformedofnewdevelopments,suchaschangingpoliticalandregulatoryenvironments,economicconditions,environmentaldevelopmentsandothersituationswhichcanhaveanimpactonyourbusiness.Weprovideinsightandadviceinareasincluding:
•Internationalexpansionthroughdirectinvestments,transactions,jointventuresorproduction-sharingagreements
•Carbonmanagement•Managingcommoditypriceandcurrencyrisks•Assessingandmanaginggeopoliticalrisks•Non-financialreportingsuchassustainabilityreporting•Managingcashrepatriation•Globalworkforcestrategiesandexpatriateplanning•Internationaltaxstructuring,taxplanningandfavorable
taxregimes•Enterprise-wideriskmanagement
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Formanycompanies,themostchallengingaspectofthesustainabilityagendaisincorporatingtheconceptintotheirlong-termstrategy.Theforcesdrivingcompaniestointegratesustainabilityintotheirstrategicplanningarenowfamiliar—regulation,climatechange,safetyandenvironment,resourceconstraints,globalizationandeaseofaccesstoinformation.Makingtheappropriatechangesintheorganizationcanbemoredifficult.Byassessingthespecificsustainabilityissuesthataffectthebusinessmostcriticallyandidentifyingwhereopportunitiesliegivennotonlyitssectorandlocale,butalsoitsparticularcompetitiveadvantages,acompanycandeveloptheappropriateresponse,andavisionforwhereitwantstobeinfiveyears.Then,tobringthatstrategytofruition,acompanycanplanitsresourceallocationarounditssustainabilityagenda,itsstrategicgoalsandmetrics,andthecommunicationsplanforstakeholders—includingemployees.PwChelpsclientsateverystageofthisprocessandembedssustainabilityconsiderationsintoallaspectsoftheorganization.
Fromataxperspective,oursustainabilityandclimatechangetaxnetworkprovidesadviceandsupportwithtaxissuesarisingfromboththegovernmentalresponse,suchastheintroductionofcarbon,environmentaltaxesandotherregulation,andfromthebusinessresponse,suchasreorganizationoracquisition,tothesustainabilityandclimatechangeagenda.
Challenge:ManaginggeopoliticalrisksEnergycompaniesunderstandthebusinessconsequencesofpoliticalchangeperhapsbetterthaninanyotherindustry.Apoliticalchange—theoutcomeofanelectionorshiftinregulatoryenvironment—canchangeeverythinginaflash.Regulatorychanges,includingtaxregimechanges,environmentalstandardsandlaborlawscanhaveasignificantimpactonthecostofdoingbusiness.
Manyofthesechangescanbeanticipated,andthereforemanaged.Theprocessofmanagingpoliticalriskcanhelppositioncompaniestobetterpreparefortherisksmostlikelytoaffectbusinessoperations,marketperformanceandshareholdervalue,aswellastakeadvantageofnewopportunitiesbeforecompetitorsdo.
PwC ServicesPwChasteamedwithEurasiaGrouptobringtogetherateamofspecialistswhodevelopedaPolitical
Financing renewable energy projects in the US
PoliticalleadersfromaroundtheworldgatheredattheCopenhagenClimateConferenceinDecember2009.Althoughnoconsensusoragreementonglobaltargetsforreductionofemissionswasreached,participantsrecognisedthatclimatechangeisoneofthegreatestchallengesofthepresentdayandthatactionsshouldbetakentokeepanytemperatureincreasestobelow2°C.
NotwithstandingtheimpasseatCopenhagenonactualemissionreductiontargetsandmechanisms,anumberofcountrieshavecreatedvariousincentiveorsubsidyprogramstoencouragethedevelopmentandbuildingofwind,solarandotherformsofrenewablegeneration.Inseveralcountries,notablyGermanyandSpain,theseprogramshaveincluded‘buy-in’tariffsforrenewableenergyprojects.Suchtariffsprovidethedevelopersofrenewableprojectslong-termoff-takecontractsforthesaleoftheelectricitygeneratedatabovemarketprices.
AdifferentapproachhasbeentakenintheUSwherefederalpolicieshavebeenadoptedtoprovideincentivesthroughtaxcreditsandacceleratedtaxdepreciationofequipment.Tobenefitfromthetaxadvantages,thedeveloperand/orotherinvestorsintherenewableenergyprojectmusthavesufficientfuturecashtaxliabilitiestoefficientlyrealizetheeconomicvalueofthetaxincentives.
TheUStaxincentiveprogramsmakeitmorechallengingforsmallerorstart-upcompaniesandnon-UScompanieswithlittleornocashtaxappetiteintheUStodeveloprenewableenergyprojects.Thecurrenteconomicclimatehasalsosignificantlyreducedthenumberoftraditionalinvestorsthathavethetaxappetitetoutilizethebenefitsoftheseincentiveprograms.Toovercomethesebarriers,variouscomplexpartnershipstructuresarebeingcreatedtoenabletheprojectdeveloperstomonetizethetaxincentives.Suchstructuresrequiretheidentificationof‘taxpartners’thathavetheabilitytoefficientlyutilizethetaxbenefits.Nonetheless,inperiodswhenthetaxincentivesexceedtheavailable‘taxequity’partners,thedevelopmentandfinancingofrenewableprojectscanbenegativelyimpactedresultingintheeitherdelayorcancellationoftheproject.AclearunderstandingoftheimportanceofthesestructuresandtherolesplayedbyvariouspartiesiscriticalforsuccessintheUSrenewablemarket.
16 GlobalEnergystatementofcapabilities
RiskAssessment(PRA)diagnosticandmonitoringmethodologywhichenablescompaniestoisolateandassessthecontributionofpoliticalrisktotheiroverallriskprofile.ThisPRAallowsenergycompaniestounderstandandbettermanagetheserisks,andidentifyandcapitalizeonunexploitedopportunities.
LeveragingPwC’sglobalnetworkisasignificantcompetitiveadvantageforourclientsastheymanagegeopoliticalrisks.Ourindustryspecialistsonthegroundunderstandboththeclient’sbusinessandthedynamicsofdoingbusinessinaterritorytargetedforexpansion.Forexample,ourtaxspecialistshelpcompaniesbalancethetaxopportunitiesandrisksinanewreportinglocationtomanagetheclient’soveralleffectivetaxratechangesproactively.
Managing political risk to improve business performance
PwCwasaskedbyamajorinternationaloilcompanytohelpthemdevelopamorequantifiableapproachtomeasuringpoliticalrisk.Thecompanyrecentlydecidedtolimititscoreoilandgasexplorationtoaselectgroupofcountrieswithhigherriskstothecompanyratherthansearchforreservesinmorepoliticallystablejurisdictions.Theorganizationbelievedthatthisapproachtoexplorationcreatedhigherrisk,butwithahigherrisk-adjustedrateofreturn.Asapartoftheiranalysis,thecompanywantedtoquantifytherisksassociatedwiththeirstrategy,especiallypoliticalrisk.Bydoingso,theycouldincorporatemeasuresofpoliticalriskintotheirbusinessdevelopmentandcapitalallocationmodels.PwCdemonstratedhowpoliticalriskcanbemeasuredbyfirstidentifyingthekeyelementsofpoliticalriskthatinfluencethecompany’sperformanceintheoilandgassector.Theseelementscanbeevaluatedusingqualitativeandquantitativemeasures.Themeasuresarethenassignedriskprobabilitiesandvaluesthatcanbeincorporatedintotheclients’riskmodel.Thisbeneficialapproachallowsriskprobabilitiesandvaluestobemonitoredandadjustedovertime;theapproachalsoprovidesthecompanywithameasureofrisk-adjustedreturnoncapital.
Issue:IndustrytransactionsandconsolidationAlargenumberofsignificanttransactionssinceAugust2009seemtobeastrongindicatorthatenergyindustryisonceagainfocusedongrowingandexpanding.Thesizeandscaleofenergycompaniescontinuestogrow;theoilfieldservicessectorisfurtherconsolidating,andupstreamcompaniesarebuyingaccesstoimportantoilandgasreserves.Today’sworldwideenergyconsumptionisprojectedtoincreaseby50percentfrom2005to2030.Tofeedtheworld’sincreasingdemandforaffordableandreliableaccessenergyrequiresgreatercapital,largerworkforces,bettertechnology,andeffectiveriskmanagement.
PwC ServicesPwChasabroadspectrumofcapabilitiestosupportcompanies’effortstomanagethegrowththatwillbenecessarytomeettheever-increasingenergydemand.Whetheracompanyisconsideringatransaction,jointventureagreement,productionsharingagreement,divestitureororganicexpansion,ourenergyprofessionalshavetheexperienceanddeepindustryunderstandingtodelivervalueandcontributetoyoursuccess.
•Mergers and acquisitions:Wefocusonthedealcontinuumfromstrategythroughexecutiontopost-dealintegration,includingfinancialandoperationalduediligence,accessingthecapitalmarketsandvaluing,negotiatingandstructuringdeals.
•Strategic and valuation advice:Weprovideindependentexpertvaluationadviceforyourbusiness.Forexample,weevaluatethefinancialimplicationsofcorporatedebt,restructuring,investments,mergersandjoint-ventures.Weadviseonbettermanagingassetsandlargecapitalinvestmentsamidstincreasedcompetition,orintimesofuncertainty,andweevaluatetechnical,operational,marketandfinancialrisks.
•Growth or divestments and developing exit strategies:Ourspecialistshelpyoucompleteandextractthemaximumvaluefromyourtransactions.
•Tax merger and acquisition services:Fullrealizationofmergersynergiesrequiresexploringtax-relatedopportunitiesandprotectingagainsttax-relatedrisks.SomeoftheareasthatourM&Ataxprofessionals
PricewaterhouseCoopers 17
delivermorevaluetoourclientsinclude:
•Addressingkeyissuesandidentifyingopportunitiesduringduediligence
•Creatingaflexibleglobalstructure•Identifyingstatutorydeadlinesandcurrentperiod
filingrequirements•Re-evaluatingtheglobaltaxstrategyvis-à-visthe
mergeroracquisition•Achievinganoptimallong-termsglobaleffectivetaxrate•Reducingcostsandcontributingtooverallsynergygoals•Evaluatingandoptimizingtaxdepartmentstructure,
resources,processesandsystems
•Post transaction services:Wehavepost-transactionspecialistswhocanassistyouinareasofsystemsandprocessintegration,humanresources,andwaystoachieveadditionalsynergiesfromacompletedtransaction.
Deal value in a down market
PwCwasaskedbyabunkerfuelcompanyinEuropetohelpsellthecompany.Thetransactioninvolvedalimitedglobalauctionacrosssevencountries,andthroughourinternationalenergynetwork,wewereabletohelpthemineachlocation.AFortune500companywasselectedasthepreferredbidder,andsubsequentlyundertookextensivefinancial,commercialandenvironmentalduediligencethroughoutaperiodofexclusivitylastingformonths.Despitedifficulttradingconditionsandaturbulentglobaloilmarket,thevendorachievedwhatheconsideredtobeastrategicvalueforthebusiness.
Challenge:ComplyingwithregulatoryandreportingrequirementsTheregulatoryandreportinglandscapeisparticularlycomplexforoilandgascompanies.Energycompaniesconductoperationsinavarietyofregulatoryandtaxregimes,manywithmoretransitionalratherthanstaticregulatoryenvironments.Thegeopolitical,environmental,safetyandregulatoryrequirements,combinedwithoftencomplexstakeholderandbusinessrelationships,addstothecomplexconditionoilandgascompaniesface.Inaddition,theadventofIFRSandSection404oftheSarbanes-OxleyActforU.S.registrantshasaddedtothechallenges.Allofthesecircumstancesdemandcarefuljudgmentaroundcorporategovernance,internalcontrolsandexternalreporting.
PwC Services•Audit services:All60,000auditorsinPwCfirms
aroundtheworlduseasingleglobalauditmethodologythatisfullycompliantwithInternationalAuditingStandardsandapplicablenationalstandards,suchasU.S.GAAPandIFRS.
Forourenergyclients,webringtogetheraglobalteamwithappropriateindustryexperienceandskills,includingfunctionalandtechnicalspecialists.Wereviewexternalreportingfortransparencyconsistentwiththeinternalinformationthatmanagementusestorunthebusiness.Togainauditcomfort,weexamineandvalidatethecontrolsputinplacebymanagementtomitigatefinancialreportingrisks.
•Reporting and compliance consulting:PwChelpsclientsidentifygovernance,riskmanagementandcomplianceinformationneedsforbothstakeholderreportingandoperationalmonitoringineveryareaofthecompany.Weevaluatethesourceandqualityofthedatatosupporttheinformationneedsand,afterconsideringcostandotherfactors,recommendprocesses,organizationanduseoftechnologyforobtainingandpreparingdataanddeliveringtimelyinformation.
•Energy regulations:Oneofthekeybenefitsouroilandgasclientsreceiveisateamofprofessionalswhoarethoroughlytrainedinindustry-specificissuesandaccountingtreatments.Wekeepabreastofchangesandtrendsinvolvingallofthepetroleumaccountingmatters—oilandgasreservesaccounting,impairments,transactions,revenuerecognition,intangibleassets,suspendedwells,andmanyothers–sothatwecanprovidethebestguidancetoourclients.
•Taxes:OilandgascompaniesareamongsomeofthelargesttaxpayersincountriessuchastheU.S.Aneffectivetaxrateof40percentorhigherisnotunusual.Incometaxes,excisetaxes,royalties,stateandlocaltaxes,alladduptoasignificantexpenseforenergyproducers.PwCcanhelpyoumanageyourglobaltaxcomplianceissues—includingcorporatetax,indirecttax,accounting,risksandopportunities.Wehaveastronginternationalnetworkoftaxcomplianceprofessionals,providingaconsistentlyhigh-qualityservice,coordinatedacrossasmanyterritoriesasyourequire.
•Public offering readiness:OurGlobalCapitalMarketsGroupworkswithcompaniesseekingtoraisedebtorequitycapitalinthecapitalmarkets.Wecanprovideanindependentviewofthecriticalissuesinvolved
18 GlobalEnergystatementofcapabilities
inaccessingaparticularcapitalmarket.Ouradviceistailoredaccordingtowhetheryouareasmaller,entrepreneurialcompanyunfamiliarwiththeIPOprocess,orasophisticatednationalormultinationalcompanythatregularlyusestheinternationalcapitalmarkets.PwCprovidesadviceatallstagesoftheprocess,frompreparingforoperationasapubliccompany,selectingtherightcapitalmarket,andestablishingtherightteamofPre-IPOworkshops.
IFRS implementation
PwCworkedwithoneofthelargestintegratedenergycompaniestoimplementIFRS,includingareviewofsignificantdifferencesbetweenexistingstatutoryGAAPandcriticalaccountingpolicydecisionsrelatedtoimplementation.Thiseffortrequiredin-depthenergyindustryexperienceaswellasdeepIFRSknowledge,bothofwhichwerebroughttobearoverthecourseofourengagement.Inaddition,weprovidedpre-andpost-implementationtrainingtothecompany’sstaffandmanagementtoenhancetheirIFRSknowledgebase.TheimplementationwasasuccessandthecompanyhasusedtheirexperiencetobuildasustainableIFRSreportingprocess.
Issue:RecruitingandretainingaskilledworkforceThegloballaborshortageforoilandgascompaniesremainsaperplexingproblem.Insomecountries,suchastheU.S.,theaverageageofemployeesiscloseto50,andoverhalfofthecurrentoilandgasworkforcewillreachretirementageinthenextdecade.Recruitingstrategiesandtheabilitytoretainemployeesinoilandgascompaniesismoreimportantnowthanever.
Withgrowingglobaldemandforenergy,companieswillneedtogrowtheirworkforcestomeettheirproductiongoalsandremaincompetitive.Developinghumanresourcestrategiesthathelpattractnewrecruits,transferknowledgefromretiringemployees,aswellasretaintheexperiencedworkforceandtheirknowledgeandskills,areimperativetothefutureoftheindustry.
PwC services
With more than 6,000 specialists in over 100 countries, the PwC network is one of the world’s largest HR advisory organizations.
PwC’smulti-disciplinaryapproachallowsustoadviseonallaspectsofpeoplemanagement,helpingourclientstoenhancevaluefortheirbusinessesthroughpeople.OurHRservicespracticebringstogetherprofessionalswhoworkacrossfourcoredisciplines:
•International assignments (expatriate services):Whencompaniesneedtoensurethattheirinternationalassignmentpoliciesarealignedwithandmeettheneedsofthebusinessandarecost-efficient,PwCcanhelp.Weknowthatoilandgascompaniesarelargelydependentoninternationalassignmentstogettherightskillsetsintherightlocations,andtohandlethefluctuatingdemandsofthebusiness.Theinternationalassignmentdeliverystructureneedstobeefficientandcosteffective.Tax-efficientinternationalassignmentstructuresandpoliciesneedtobeinplace.Youneedtomanagerisksbycomplyingwiththeregulationswhereyourworkforceisdeployed.PwC’sHRspecialistscanhelpwiththeseconcerns.
•HR management:RecentpressureonglobalorganizationstoimprovebusinesseffectivenessandminimizeriskisatrendthathashittheHRfunctionhard.ThedrivetoimprovebusinessperformancethroughhumancapitalhasmadeitcriticalfororganizationstorealizeanddemonstratethevalueofHRpoliciesandprocesses.PwC’shumanresourceservicesteamhelpsorganizationsachieveHRassuranceandoffersanobjectiveviewofyourHRfunction’sbusinesseffectiveness.AccesstoSaratogahumancapitalandHRfunctionbenchmarkingdataallowsustounderpinourknowledgewithharddata.OurservicesincludeHRmetricsandbenchmarking,HRfunctioneffectivenessandservicedelivery,andHRtransactionservices.
•Employee rewards (compensation, benefits, pensions):Creatingtherightglobalrewardplansforyouremployeesisessentialforattractingandretainingkeystaff,achievingbusinessandhumanresourceobjectives,aswellasoptimizingrelatedcosts.Butbalancingbusinessprioritieswithshareholderinterests
PricewaterhouseCoopers 19
canbeachallenge.Bydrawingonthecompensation,benefits,pensionandfinancialexperienceofourglobalnetwork,wehelporganizationslinkexecutiveandemployeerewardstobusinessgoalsandshareholdervalue.Ournetworkofrewardconsultantsisfullyintegratedandpeoplefocused.Webringintheskillsandresourcestodelivertechnical,tax,legal,accountingandfinancialservicesviaanevidence-basedapproach,givingourclientsacompetitiveadvantageintoday’smarket.Weadviseoncompensation,benefitsandpensions.
•Organizational change and program effectiveness:Gettingthebestfrompeopleateverylevelwhenthereisconstantchangeisthekeytosustainablecompetitiveadvantage.Solidstrategies,processesandtechnologyalonedonotdeliverresults.Ittakespeopletoaccept,adopt,drive,andsustainthechangetorealizetangibleimpact.Successinbusinesshingesonstrategicagilityandtheabilitytoexecute.PwCcanhelpcompaniesbuildmoreeffectiveorganizationalstructures,motivatepeopleandgettherightpeopleintotherightjobs.
Alargemultinationaloilandgascompanydecideditwantedtominimizesafetyrisks,andexplorehowitmightgoaboutmeasuringtheeffectivenessofgovernance,regulationandcomplianceactivityacrosstheorganization.PwCwasengagedatthegroupleveltolookathowothercompaniesembedgoodgovernancemechanismsandmeasureitseffectiveness,andattheassetleveltolookindetailatwhathadleadstosafetyfailures.Weexaminedwhatimprovementsanorganizationcouldmakeinlocalmanagementinformationandriskandcontrolpractices.PwCwasaskedtofurtherexplorehowexistingmeasurementmechanismscouldbeusedtoassesstheeffectivenessofgovernanceinthebusiness.Wewereabletoprovideavaluableinsighttoarangeofgovernance,regulationandcomplianceapproachesusedbyothercompanies.Byidentifyingthekeyconstituentsrequiredtomeasuretheeffectivenessofthebusiness,weusedthatinformationtosupportanumberofareaswithintheclient,specificallyincludingsafety.Themeasurementconceptdevelopedbroughtanumberofdatasourcestogethertoprovideacross-cuttingviewoftheeffectivenessofriskmanagementthroughanumberoflenses.
20 GlobalEnergystatementofcapabilities
PwCislocatedwherevertheindustryisexploringfor,producing,refiningandsellinghydrocarbons.Morethan3,100specialistsareassignedfulltimetotheGlobalEnergyGroup,givingourclientsaccesstooilandgasspecialistsaroundtheworld.Wehaveover300partnersservingglobalenergycompaniesworldwide.HeadquarteredinHouston,TexasourGlobalEnergyGrouphasmajorenergycentersaroundtheworldincludingBrazil,Canada,China,Norway,Russia,theUK,andthroughouttheMiddleEastandAfrica.
AfricaEliasPungong,[email protected]
AustraliaMichaelHappell,[email protected]
CanadaScottBolton,[email protected]
ChinaGavinChui,[email protected]
IndiaKameswaraRao,[email protected]
Central&SouthAmericaJorgeBacher,[email protected]
MiddleEastDonPainter,[email protected]
Russia&Central,EasternEuropeDaveGray,[email protected]
UnitedKingdomRossHunter,[email protected]
UnitedStatesRichPaterson,[email protected]
Ourcommitmenttotheenergyindustrygoesbeyondourservices.Westayintouchwithourclientsthroughthoughtleadershipandsponsorshipactivities.PwCisaPatronoftheWorldEnergyCouncil,andalong-timesponsorandparticipantattheWorldEnergyCongresstobeheldin2010inMontréal,Canada,andtheWorldPetroleumCongress,tobeheldin2011inDoha,Qatar.
OurEnergypracticeistheonlyBigFourfirmtoserveasakeysponsoroftheGlobalOilSummitatCERAWEEKeachyear.IHSCERA(fkaCambridgeEnergyResearchAssociates)isthehighlyrespectedenergyadvisoryfirmandthisannualeventisoneofthemostwidelyattendedintheindustry.Ourenergypartnersparticipateinmanyoftheleadingindustryorganizationsonaterritorialbasis,tokeepabreastofdevelopingregulatorychanges,industryinformationandtohearfirst-handfromoilandgasprofessionals.
WhatmakesPwCdifferent?
PricewaterhouseCoopers 21
Fromourexperience,wedevelopindustryspecificinstructionalmaterialsandreportsonissuesofstrategicimportancetohelpkeepourclientsinformed.Someofourupcomingandrecentpublicationsinclude:
Renewable Deals*RenewableenergyisaccountingforanincreasingsliceofoverallM&Aactivityinthepowerutilitiessector.DealnumbersandtotalM&Avalueinthesectorasawholedeclinedsignificantlyin2009butthedeclineindealsforrenewableassetsortechnologywasmuchlessmarkedthaninthewidersector.ThesearesomeofthekeyfindingsinPwC’sannualreviewofmergersandacquisitionsactivitywithintheglobalrenewableenergymarket.Thenumberofrenewablesdealsfellbyoverathird(36%)year-on-yearfrom2008to2009butaveragedealsize(fordealswithdisclosedvalues)rosebyathird(34%)—upfromanaverageofUS$45.5milliontoUS$60.8million.
Appetite for changeBasedonalmost700interviews,conductedin15countries,Appetiteforchangeexaminesattitudesintheinternationalbusinesscommunitytowardsenvironmentalregulation,legislationandtaxes.Climatechangeistestingtheabilityoftheworld’sleaderstodevelopeffectiveenvironmentalpoliciesandmanyarefrustratedwiththepaceofnegotiations,asevidencedbytheCopenhagensummit.Whilealargemajorityofbusinessesarepotentialsupportersofincentives,emissionstradingschemesandcarbontaxes,manyexecutivesalsobelievethatcurrentgovernmentpoliciesarenotsufficientlycoherentoreffective.Still,theyremainreadytosupportpoliciesthatareconsistent,clearlylinkedtosavingtheenvironment,anddevelopedinconsultationwiththeprivatesector.
Energy SEC Reserves Reporting—Leading the change Formorethan25years,theSEC’srulesformeasuringandreportingoilandnaturalgasreservesremainedrelativelyunchanged,despiteincreasedgeologicalcomplexity,significantadvancesintechnologyandincreasedpricevolatilityinglobalmarkets.Astimeprogressed,theseruleseventuallymadeitmoredifficultforinvestorsandanalyststoassessandcomparetheoilandgasthatcompaniesheldunderground.Today,however,anewsetofreportingprinciples,adoptedinlate2008,willimpactthewayoilandgascompaniescommunicatereservesinformationtostakeholders.TheSEC’snewrulesgiveenergyexecutivesanddirectorstheopportunitytomorecloselyalignreservesreportingwiththeiroverallbusinessstrategyandtheircompetitivepositioninthemarketplace.
IFRS bulletin: Straight away—August 2009TheextractiveactivitiesprojectattheIASBTheExtractiveActivitiesprojectattheIASBopensthedoortopotentialradicalchangestofinancialreportingforminingandoil&gas.Thereislittleguidanceontheaccountingforexploration,developmentandproductionofmineralsandoil&gasincurrentIFRS.ThisDiscussionPaper(DP)isthefirststeptowardsanIFRSfortheseactivities.ThedraftDPwaswrittenbyfournationalstandardsettersattherequestoftheIASB.TheworkwasledbytheAustralianAccountingStandardsBoardwithparticipationfromCanada,NorwayandSouthAfrica.TheDPwillbepublishedformallybytheIASBinQuarter1,2010,withaninvitationtocomment.
22 GlobalEnergystatementofcapabilities
Financial reporting in the oil and gas industry*InternationalFinancialReportingStandards—NationalstandardsinothercountriesarebeingconvergedwithIFRS.TheglobaltrendtowardsIFRShasgainedsignificantfurthermomentumwiththeUSSecuritiesandExchangeCommission’s(SEC)commitmenttothestandards,beginningwithitsdecisiontodroptherequirementforforeignlistedcompaniesintheUStoreconciletoUSGAAP.Thiseditionof“Financialreportingintheoilandgasindustry”describesthefinancialreportingimplicationsofIFRSacrossanumberofareasselectedfortheirparticularrelevancetooilandgascompanies.Availableonlineatwww.pwc.com/energy
6th Edition Petroleum Accounting Principles, Procedures & IssuespublishedjointlywiththeUniversityofNorthTexas’ProfessionalDevelopmentInstitute.ThistextbookandleadingreferencetoolfocusesonU.S.financialaccountingandreportingforpetroleumexplorationandproductionactivities.Thebookalsocovershottopicsincludingriskmanagement,internationaloperations,accountingforbusinesscombinationsandothers.The7theditionisexpectedtobeavailableinearly2011.Availablethroughwww.pdi.orgorwww.amazon.com
Working together: Energy sector income tax benchmarking study Incometaxdisclosures,presentedinannualreports,areanimportantinsightintoacompany’staxaffairs,withtheeffectiveincometaxratebeingtheheadlineratecommonlyquotedbychieffinancialofficerswhendiscussingtheircompany’sincometaxaffairs.Inthisstudy,PwCpresentsinsightsintowhereenergycompaniesstandcomparedtotheirpeergroupfortheexploration&production,integratedoil&gasandenergyservicessegmentsoftheindustry.Thestudyencompasses37companieslocatedin17differentcountriesaroundtheworld.
PwCfoundthattheaverageEffectiveIncomeTaxRate(ETR)forthethree-yearperiod(2005-2007)was33.6%,higherthananyoftheninesectorsPwChasanalysedforthesameperiod.
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ThememberfirmsofthePwCnetworkprovideindustry-focusedassurance,taxandadvisoryservicestobuildpublictrustandenhancevalueforitsclientsandtheirstakeholders.Morethan155,000peoplein151countriesacrossournetworkworkcollaborativelytodevelopfreshperspectivesandpracticaladvice.
Global Contacts
AlanPageGlobalEnergy,Utilities&[email protected]
JamesKochGlobalEnergy,Utilities&[email protected]
MichaelHurleyGlobalEnergy,Utilities&[email protected]
Formoreinformation,pleasevisit
www.pwc.com/energy
Globalenergyteamcontacts
©2010PricewaterhouseCoopers.Allrightsreserved.“PricewaterhouseCoopers”and“PwC”refertothenetworkofmemberfirmsofPricewaterhouseCoopersInternationalLimited(PwCIL).EachmemberfirmisaseparatelegalentityanddoesnotactasagentofPwCILoranyothermemberfirm.PwCILdoesnotprovideanyservicestoclients.PwCILisnotresponsibleorliablefortheactsoromissionsofanyofitsmemberfirmsnorcanitcontroltheexerciseoftheirprofessionaljudgmentorbindtheminanyway.Nomemberfirmisresponsibleorliablefortheactsoromissionsofanyothermemberfirmnorcanitcontroltheexerciseofanothermemberfirm’sprofessionaljudgmentorbindanothermemberfirmorPwCILinanyway.DH-10-0356