JOINT VENTURE “POLTAVA PETROLEUM COMPANY”(JV PPC), a joint Ukrainian-British enterprise, was established in 1994. LLC PGNK is a leader among non-governmental oil and gas extraction enterprises in Ukraine. The company’s activities include exploration, exploration, extraction, and processing of oil and gas.
Background and Objectives
The company experienced rapid development during the period from 2007 to 2018: over 50 wells were drilled and connected, 20 wells were restored, production facilities were modernized, an enhanced hydrocarbon recovery unit and Velocity String were introduced, the loading capacity of the LPG plant was increased, and much more.
For management and accounting, 7 different automation systems were used. Some of them became technologically and morally outdated, leading to difficulties in obtaining reliable, detailed information and generating corporate reports promptly, as well as transitioning to accounting under IFRS.
Thus, the main goal of the implementation project was to create a new unified automated system to ensure operational and reliable information for managerial decisions, automate accounting according to international standards based on a software product that would support further development, scalability, and flexibility of the system, as well as platforms for integrating other specialized systems.
Project Progress
To implement this project, we turned to CONTO, a leading provider of ERP-class systems known for its reliable partnership. After identifying our needs, we selected the next-generation products “BAS ERP” and “BAS Document Management” as the foundation of our information system. Together, these products meet our requirements for functionality, performance, and adaptability to business needs.
The project was carried out in several phases:
- Preparation for automation: Inspection and creation of the implementation project concept.
- Refinement of the standard software product considering industry-specific requirements and corporate demands for functional blocks.
- Pilot operation, during which the main processes of data accounting and processing were tested and refined.
- Support and maintenance during the initial 3 months of industrial operation. User support and software refinement were conducted based on tasks not identified in the initial phase.
The new information system was deployed for industrial operation on January 1, 2022, with 70 workplaces. Training for users on the new system was provided by the implementation center, both in group sessions and individually at workstations.
During the project, the following areas of accounting were automated:
1. Accounting, in accordance with the adopted accounting policy of the majority shareholder, based on IFRS.
2. Procurement management, including inventory management of spare parts and materials based on the MIN-MAX principle.
3. Sales management, including the development of an automated workstation for liquefied gas shipment, specialized analytical sales reports.
4. Inventory management, utilizing standard warehouse functionality.
5. Fixed assets and intangible assets accounting:
– According to IFRS at the regulated value in hryvnias.
– According to IFRS at the alternative value in hryvnias based on corporate standards.
– Regulated value according to national tax accounting standards.
6. Management of settlements with suppliers and buyers, utilizing standard functionality.
7. Management of settlements with individuals for land lease (servitudes).
8. Management of settlements with accountable individuals, utilizing standard functionality.
9. Cash flow management:
– Treasury – adaptation of the treasury module to the company’s specifics – handling a large volume of monthly payments.
– Integration with client-bank applications.
10. Accounting of investments and capital construction broken down by projects (CAPEX).
11. Expense and revenue accounting broken down by cost centers and cost items (OPEX).
12. Management of calculating the cost of finished products, considering the specifics of the extraction industry. BOI distribution.
13. Administrative and catering services.
14. Tax accounting for VAT, servitudes, and LNG excise tax, adapted to the industry specifics of the extraction enterprise with a significant volume of various taxes and fees.
15. Accounting for tax differences for income tax calculation purposes. Standard functionality.
16. Integration with the “BAS Document Workflow” program:
– Centralized management of counterparties and contracts in the “BAS ERP” system through “BAS Document Workflow.”
Project Implementation Results
To carry out management processes within the company and to monitor the efficiency of financial, material, and labor resources utilization, all accounting of current business operations is conducted within a unified information environment. Accounting processes across all accounting areas and structural units are standardized, and accounting is performed in accordance with IFRS.
The company receives reliable and timely information for the preparation of management reporting, which has positively impacted the speed of interaction between departments in the information field.
Significant improvements have been made in inventory management:
- Centralized management of the product directory has eliminated situations of duplicate entries, enhancing inventory management.
- Reduced turnaround time for issuing inventory. The speed of issuing goods has increased due to warehouse optimization and clear requests.
- Optimized requests for issuing goods. All requests are processed after verifying the availability of goods and with clear product specifications.
- Reduced time for issuing goods – items are issued on the same day as requested.
- Increased turnover of warehouse and material stocks.
- Implemented tracking of product movement, including tracking of items that have been written off and by whom.
- Reservation of goods for customers. The previous issue where goods were taken by the wrong department has been eliminated.
Business procurement processes have been improved:
- The procurement process for replenishing inventory (min-max) has been optimized. Currently, there are no situations where inventory is purchased unnecessarily as it is already available in sufficient quantities.
- The process of purchasing goods based on requests has been streamlined – it is now a transparent process for the requester. There is clear tracking of the entire procurement process: from the purchase request to inventory receipt, with responsible individuals involved in procurement. The system displays the expected delivery date, and the requester is notified upon arrival of the goods.
- Tracking of critical inventory levels has been optimized. Procurement managers spend less time tracking critical inventory levels as the system handles the tracking.
Financial management and treasury management have become more efficient:
- The quality of data regarding the company’s financial position for decision-making has improved.
- The time required to compile management reports has decreased.
- The processing time for payment requests has decreased.
- The new system has become the single source of truth for data on counterparties and contracts.
- Accounting is conducted in accordance with IFRS rules.
Just 8 months after implementation, we observed significant changes in the following metrics:
- Order processing has accelerated by approximately 25-30%.
- Material inventory levels have decreased by 15-20%.
- Inventory turnover has increased by 20-25%.
- The time for report preparation and retrieval has decreased by 1.5 times.
- Overall business process transparency across the company has improved.
We positively evaluate the results of the implementation project; the automation goals set have been achieved. The company’s management extends gratitude to the CONTO team for implementing the system and preparing the company’s staff to work with the software suite. We plan to continue developing the information system.