Lower costs, half-hearted SOX in oil and gas

Canada’s oil and gas industry is bullish when it comes to IT acquisitions, but less so when it comes to complying with the looming U.S. Sarbanes-Oxley accounting laws, according to a recent Ipsos-Reid survey.

Of the 43 companies interviewed, 80 per cent “strongly agreed” that IT is an important issue for the industry, and most see it continuing as a top priority in the near future.

“What we see here is stronger numbers than we’ve seen in the past on the importance of IT in the oil and gas industry,” said Tim Moro, vice-president at Ipsos-Reid and a longtime industry observer.

Unlike other industries, Moro said energy companies have a tendency to view IT purchases as investments with the potential to reduce overall corporate costs – a mindset he credits to the industry’s long but not widely known relationship with cutting-edge IT.

As well, the IT managers themselves are feeling the pressure to buy. “The key IT decision makers themselves are not showing what we regard as hugely strong satisfaction with (what) they have in place,” Moro added.

But not all respondents agree on how best to resolve that unease. Thirty-nine per cent of respondents said they tend to meet IT challenges by buying new equipment, while a quarter said easier data linking and integration is the preferred way to respond.

But when it comes to Sarbanes-Oxley, or SOX as it has been dubbed, the financial transparency laws that will directly affect Canadian companies listed on U.S. stock exchanges as of next year, respondents were less sure. Those surveyed were nearly evenly divided among those who are taking steps to become compliant (28 per cent), those who weren’t even aware it existed (31 per cent), and those who are somewhere in between.

It’s widely expected that Canadian regulators will soon follow suit with rules similar to those outlined in SOX.

“We do have a significant number of oil and gas companies that don’t have to bother with that,” said Yogi Schulz, president of Corvelle Consulting in Calgary, which has many clients in the Alberta energy sector. “However, a few companies are saying, ‘Canadian rules are just around the corner, so we might as well start thinking about this stuff.'”

Schulz confirmed that IT is a big issue for the industry, but more around its support role for the exploration for resources as opposed to back office applications, he said.

The survey rang true when it found that many respondents were choosing to integrate their current systems, rather than buy new technology, he said.

“They’re all thinking about that,” Schulz added.

In fact, the challenge faced by linking systems is similar to that faced by companies undergoing Sarbanes-Oxley projects – data quality. “(It’s) an impediment,” he added. Because the U.S. financial law stresses transparency in financial accounting, the way data is stored is a key issue.

Also, many oil and gas companies invested in middleware software over the past several years, but few have been able to drive any quantifiable return on investment on their purchases. But Schulz said that has little to do with the quality of the software. “It’s identifying opportunities to use it…data quality issues get in the way.”

The survey was conducted with 49 IT decision makers in the oil and gas industry.