Unravelling the black box of “Upstream Finance Controlling”

Financial data are undoubtedly one of the most important sources of information for taking management decisions. Nowadays, Finance Controlling is an often-used term in the corporate business world, however, it seems that many people are not too familiar with it. And when it comes to Upstream Finance Controlling, it sounds even more complex – but it´s actually not! Our Finance colleagues from Upstream are here to explain.

What is Upstream?

In the last couple of years OMV has undergone remarkable international growth through acquisitions in Russia, New Zealand, the United Arab Emirates and Malaysia. OMV Upstream is currently present in more than 10 countries spread across four continents. “The Upstream business refers to activities relating to the exploration and appraisal of hydrocarbons as well as developing and producing them”, explains Yosri Maknine, OMV Department Manager Upstream Controlling. “At a later stage, it also covers the activities of abandoning wells and facilities. As an integrated oil & gas company, OMV has a strong Upstream segment. Production of hydrocarbons comes from four different continents,” he adds. 

As an integrated oil & gas company, OMV has a strong Upstream segment. Production of hydrocarbons comes from four different continents” 
Yosri Maknine, OMV Department Manager Upstream Controlling

A judge has his legal code, a controller his financial statements

A controller is an individual who supervises the running of a business. On top of that, a finance controller looks after the economic matters that affect our business. Like a judge has his legal code, the controller has his financial statements. In essence, you can imagine Profit and Loss (P&L), Balance Sheet (BS) and Free Cash Flow (FCF) as the main financial statements. 

We report actual figures to take care of the present, and together with market estimates do our best to predict the future
Camilo Sanchez, OMV Upstream Expert Controller

Camilo Sanchez, Upstream Expert Controller at OMV, moved from Colombia to Austria and joined OMV in 2014. He gives us an insight into his activities in the office. “We report actual figures to take care of the present, and together with market estimates do our best to predict the future. For this purpose, a monthly forecast is in place that aims to estimate what the Operating Result and our Free Cash Flow will be by the end of the year. Additionally, there is a planning process each year that calculates our finances for the following five years.” Apart from the standard financial statements, Upstream controllers use specific key performance indicators to provide a better understanding of the business. These include for example production costs per boe (=barrel of oil equivalent) or the so-called reserve replacement rate (RRR). The latter essentially measures the amount of proved reserves added to a company's reserve base during the year relative to the amount of oil and gas produced – the higher the ratio, the better the outlook for an oil and gas company. 

Upstream Controlling is dynamic and international – just like the team 

It is a very dynamic environment due to the exposure to market changes (i.e. Brent price developments). The aim is to provide the most accurate information to management but, as deadlines are usually very tight, a laddered structure is in place: mainly 1) local controllers and 2) segment controllers. Local controllers work in the different branch offices around the world. They are usually locals who know the country, speak the language and understand the culture. In order to keep the teams balanced, rotations are in place, which ensure that some expats are also present in the local controller teams. The teams work very closely with the business units and summarize the information on a country level basis. Segment controllers work in the Vienna head office, they review and challenge the information from all the countries in order to convert it into a single consolidated Upstream result.
 

The team is international, passionate and always strives for better performance. We recently celebrated the close of the acquisition of Shell’s Upstream business in New Zealand and now OMV assumes the operatorship in the Maui and Pohokura assets ensuring a leading position in the country. The purchase price surpassed half a billion US dollars whilst the impact of this acquisition on our finance key performance indicators was in the focus of analysis. Together with the local controlling team in Wellington, our controllers constantly challenged the figures provided to them and made simulations to come to the best possible estimates of the future impact on OMV´s finances. Once a year the Upstream Controlling team overcomes distances when controllers from all over the world meet under one roof during the so-called “Controlling Days”. Last year controllers from over 15 different nationalities shared their knowledge, views and experience during a two-day workshop. “This initiative brings us closer together as a team, we get to meet each other and prepare for the upcoming challenges”, grins Camilo.