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Digital transformation of financial metrics management for oil & gas projects
Client
Service
Audit and monitoring of financial metrics for oil and gas projects
Oil and gas holding
Years
2021 – present
Dynamic and rapidly expanding holding company has achieved significant financial success over the past 10 years and has become one of the world’s leading players in the extraction and processing of hydrocarbons.
Their main focus is on developing and implementing products in the oil and gas industry, providing a complete cycle from exploration and development of oil fields to production and sale of oil products.
As one of the leading companies in the Russian oil industry in terms of efficiency, the holding owns over 70 oil production, refining, and sales facilities across Russia, as well as in neighboring and distant countries.
Their main focus is on developing and implementing products in the oil and gas industry, providing a complete cycle from exploration and development of oil fields to production and sale of oil products.
As one of the leading companies in the Russian oil industry in terms of efficiency, the holding owns over 70 oil production, refining, and sales facilities across Russia, as well as in neighboring and distant countries.
About the client
The holding company operates numerous subsidiaries with tens of thousands of employees. In line with our ongoing digital transformation since 2018, the company has been gradually migrating all processes to IT systems. Automation and transparency is a key in any business process. This transparency and current financial indicators is needed for top management and major shareholders to make timely management decisions.
Our goal was to replace an outdated accounting system that controlled audits and monitored the financial performance of the holding’s subsidiaries. The previous version of the system had stability issues and did not meet the security requirements demanded by this strategically important industry.
The new version of the accounting IT system was expected to manage financial indicators and account for most of the business processes of 18 subsidiary companies. These subsidiaries focus on construction and engineering work at oil fields and refineries. It was also intended that the new IT system would conduct regular monitoring and control the development of over 200 oil and gas projects within the holding company.
Our goal was to replace an outdated accounting system that controlled audits and monitored the financial performance of the holding’s subsidiaries. The previous version of the system had stability issues and did not meet the security requirements demanded by this strategically important industry.
The new version of the accounting IT system was expected to manage financial indicators and account for most of the business processes of 18 subsidiary companies. These subsidiaries focus on construction and engineering work at oil fields and refineries. It was also intended that the new IT system would conduct regular monitoring and control the development of over 200 oil and gas projects within the holding company.
The challenge
At the start of the project, a development team of four people was assembled by Digex Co. The core of the new accounting system was decided to be built on .NET, Java, and Spring. While writing the code, special security requirements were taken into account that were introduced across the group of companies at the beginning of the digitization doctrine in 2018.
Within six months of work, a prototype was created and tested during the first half of 2022. Gradually, new structures of the oil and gas holding company were connected to the system. The IT system for auditing and monitoring the financial performance of the company’s projects was connected to multiple subsystems operating in subsidiaries and specific facilities. Information for the accounting system is received from thirty directories within the group of companies.
The system is regularly tested, and updates are delivered within a two-week release schedule.
The main functional features implemented in the system by the end of the scaling launch in late 2022 include:
Within six months of work, a prototype was created and tested during the first half of 2022. Gradually, new structures of the oil and gas holding company were connected to the system. The IT system for auditing and monitoring the financial performance of the company’s projects was connected to multiple subsystems operating in subsidiaries and specific facilities. Information for the accounting system is received from thirty directories within the group of companies.
The system is regularly tested, and updates are delivered within a two-week release schedule.
The main functional features implemented in the system by the end of the scaling launch in late 2022 include:
- Web application for monitoring and audit of financial indicators for the heads of subsidiary enterprises.
- The audit department from the central office conducts continuous control over the activities of organizations and the fulfillment of KPIs for each specific company.
- Data in the form of graphs and charts is displayed in a BI system, with separate access implemented for the holding company’s board of directors.
Work progress
The specialized IT solution developed by the Digex Co. team monitors the work of 200+ oil and gas industry projects. These are mainly projects related to construction, engineering work, and other activities for the extraction, processing, and delivery of hydrocarbons. They cover both the construction of entire complexes for field development and narrower areas at the intersection of chemical research, mining of minerals, and AI applications.
The system records the financial performance of active processes in real-time. Examples of accountable projects include:
Commissioning of mobile compressor stations
The system records the financial performance of active processes in real-time. Examples of accountable projects include:
Commissioning of mobile compressor stations
- Capital construction of new oil refineries
- Reduction of costs for maintaining water intake at existing fields
- Environmental monitoring and risk management at development sites
- Development of new recipes for technological fluids for wells killing in complex conditions
- Application of Data Science tools for oil engineering tasks
- Development of a software engineering complex for drilling and downhole work
- Application of machine learning algorithms to organize drilling process improvement
- Development of new recipes for technological fluids for wells killing in complex conditions.
The result
IT Solution analyzes the financial metrics of each project of its companies and continuously monitors their performance. The system collects and stores data on many financial indicators. Reports are presented visually in graphs and diagrams in the BI system interface and as numbers in the web application.
Some examples of metrics collected for each of the hundreds of oil and gas holding projects are:
Some examples of metrics collected for each of the hundreds of oil and gas holding projects are:
- FCF (Free Cash Flow) — the amount of cash that remains with an organization after all capital expenditures to maintain assets.
- CAGR (Compound Annual Growth Rate) — a measure of the cumulative average annual growth rate.
- NPV (Net Present Value) — a method that calculates the expected return, taking into account changes in the value of cash flows (discounting).
- PI (Profitability Index) — a measure of the ratio of discounted cash flows from investments to the sum of investments.
- EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) — profit before interest, taxes, and depreciation and amortization deductions.
- EMV (Estimated Monetary Value) — the final market value, which represents the investment value at the end of the investment period.
- Capex (Capital Expenditure) — a company’s expenses for acquiring non-current assets (with a useful life of more than one year) and for their modernization.
- Opex (Operating Expenditure) — a company’s operating expenses, which include expenses related to its current activities that affect its operating profit.
- Revex (Revenue Expenditures) — current period expenses.
- AUR (Administrative and Management Expenses) — costs associated with the maintenance and servicing of the management structure.
- NPV/FCF is the ratio of the net present value (expected future project income minus its initial cost) to the free cash flow.
- KPIs (Key Performance Indicators) are critical indicators of efficiency that help assess the effectiveness of achieving strategic objectives.
- Oil Production Qn is the cumulative oil production.
- Oil Production Qz is the monthly oil production.
- FCF/tonne is the ratio of free cash flow to cumulative oil production.
Financial metrics
30 000
employees work on oil and gas projects in the holding
140
hours per month Digex Co. spends on IT solution development
30+
financial metrics are monitored in the system
200+
company projects track financial metrics in the IT system
Facts and figures
18
oil and gas holding subsidiaries operate within the accounting system
Technology stack
Languages
Java, TypeScript
Database
PostgreSQL
Instruments
JIRA, Confluence, Figma
Technology
Spring, React
Access management
Keycloak
Languages
Java, TypeScript
Database
PostgreSQL
Instruments
JIRA, Confluence, Figma
Technology
Spring, React
Access management
Keycloak
Other cases
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