Split Billing

Date PublishedMarch 27, 2014
CompanyLeadstone Group Inc., Oilfield HUB
Article AuthorKevin Turko
Tags, , , ,
PULSE Interactive

Split Billing

My article in the last issue of the PULSE focused on double billing practices in the patch. It certainly struck a huge cord from both sides of the industry. From both sides, I mean from those who sell products and services and issue invoices, to those who buy and have to approve these same invoices.

It seems, particularly from an operator’s point of view, there is significant mistrust in the industry as one of several readers shared his thoughts with me ……

“I read your article and was very pleased that someone is having the courage to address one of the serious issues that is holding us back here at home. Whether it is double billing, or a bogus one. Adding hours to the actual time contractors spend in the field is always interesting. Or the concept of bringing a trainee to the site and charging his time without your approval is another point. How about adding a few thousand to the bill and if you get caught then and maybe then, the service provider will admit and adjust the invoice. However, if not questioned then they would pocket that money. I disagree that this characteristic occurs every once in a while. I believe it is across the board and the honest few follow along as something that is accepted.”

Others also pointed out to me that split billing practises also leads to potential double billing across the industry. When amalgamating and reconciling these invoices, duplicate charges are found at the trailing edge of the first invoice covering the same services or rentals invoiced on the next (split) invoice. In addition to the hours issue mentioned above, the other common refrain centers squarely on what rentals are chargeable throughout the lifecycle of a well. There is a huge trust factor built into the rental equation, again from both sides of the industry, as to what period a rental was utilized or not. When did the rental period begin and when did it stop? Was there non-chargeable time during this period and do both the vendor and the operator agree to these billable costs as part of the rental contract? If oilfield rentals were as simple as renting a car, cost management in the patch would be so much simpler! But it’s not. So how do you right this troublesome cost efficiency ship that has been going in the wrong direction for so many decades?

The good old days of ‘just’ managing all of this information

Kevin Turko, CEO Leadstone Group

Kevin Turko, CEO Leadstone Group

with the phone, and over a handshake are dwindling fast…Double Billing

At the heart of the issue is information, or lack thereof, that is readily available, on both sides of the fence. From the services side, what information is in the hands of those who issue invoices for services and rentals rendered to ensure the amounts being billed coincide with the daily reporting the operator is tracking and expecting? And from the operator’s perspective, are they adequately tracking the right information within their spreadsheets or oilfield reporting systems to manage and approve these expenses, and can this billing information be easily shared with their service providers?

The good old days of ‘just’ managing all of this information over the phone or with a handshake are dwindling fast as surplus or onerous costs can no longer be ignored or simply absorbed as part of the ‘contingency’ cost of the well. Everyone deserves their fair share, but this just doesn’t work anymore.