Net vs. JIB

Within the Disbursement & JIB Manager (Integrated Edition), working interest owners can be considered JIB or net. JIB stands for Joint Interest Billing. In the Disbursement and JIB Manager, a working interest owner is considered JIB if the operator desires to bill the owner's share of expenses on an invoice, as opposed to the expenses being netted from that owner's share of revenue. A Net owner is a working interest owner whose share of expenses is automatically netted from his share of revenue on a well.

The setting that determines whether a working interest owner is JIB or Net is found in the Division of Interest screen.

• If the JIB Int option is checked, then the owner's working interest in that particular well is treated as a JIB, which will generate an invoice for the expense he incurs on that well.
  
• If the JIB Int option is unchecked, then the owner's working interest that particular well is treated as Net, which will cause his expenses to be netted from his share of revenue in that well.
  

It is not necessary to make all interests for a working interest owner either JIB or Net. You can have a mix of status for the same owner. Since the option is set for each well in the Division of Interest screen, you can assign some well interests for the owner to be JIB, and some to be Net.

Any interest that is marked as JIB Int will require that those expenses be processed on a JIB run closing. The JIB invoice is only created when a JIB Run is closed. If the JIB run is not closed, then the expenses for any JIB interest will not be billed out to the working interest owner.

Any Net working interest (JIB Int is unchecked) expenses will be processed when the Revenue Run is closed. The Net expenses are processed on a Revenue Run closing because they are netted from the revenue for the owner. The Revenue Run closing will only process expenses for any owners not marked as JIB in the wells' division of interests.

It is important to understand how this setting will affect the processing for amounts allocated to your owners during the run closings.

Net: Expenses for Net owners are processed when the Revenue Run is closed. The owner's expenses will be deducted from the revenue that he earns and a net check will be sent to the owner. If the owner has more expenses than revenue, this amount will go into suspense and will be known as a deficit. Deficits are posted in QuickBooks to the account chosen in SherWare in the posting preferences as the Deficit account. The owner's deficit balance is store as suspense on the suspense history screen. If the owner sends in a check for this deficit, you can receive the payment in the Receive Owner Net Payment screen. If the owner does not pay the deficit, it will automatically be deducted from future revenue before any more revenue is sent to him until the deficit is covered in full.

JIB: Expenses for JIB owners are processed when the JIB Run is closed. A JIB invoice (created by the JIB closing) will be printed and mailed to the owner for all of the expenses and a check (created when the revenue run is closed) will be sent to the owner for all of the revenue. The owner's balance is the total amount of all outstanding invoices. The amount of the expense is posted to the account chosen in the posting preferences in SherWare as the JIB Receivable account. The owner's balance is then kept in QuickBooks. If the owner does not pay for the invoice, his balance will continue to accumulate while his disbursement checks will still be sent to him in full.

In order to mark an owner as being Net or JIB, you will need to use the Division of Interests screen. In this screen, you'll find an option 'JIB Int.' If checked, the interest being displayed will be considered a JIB interest. If unchecked, the interest being displayed will be considered a Net interest. We'll assume that all royalty and override owners are Net since these owners are not typically allocated any well expenses. Therefore, when entering a royalty or override interest within a well, leave the JIB Int option unchecked.

Since the status of JIB or Net is specified for each individual interest within a well, it is possible for an owner to have a combination of Net interests in some wells, and JIB interest in other wells.

If the JIB Int option is checked, all expenses allocated to that owner within that well will be invoiced to him during a JIB run closing. The JIB setting does NOT apply to only a portion of expenses such as drilling and completion expenses. Therefore, if the JIB Int option is checked, all expenses, including lease operating expenses, will be invoiced to the owner during the JIB run closing.

Switching an owner from Net to JIB or JIB to Net

We do not recommend changing owners between being Net and JIB. However, we do realize that sometimes this has to be done. If you have to change this setting for an owner, you can do so with the following steps. Understand that if you try to view past reports for this owner, they may be affected.
To switch an owner from Net to JIB:
1) Create a backup.
2) Mark the "JIB Int" option on the Division of Interest screen for the interests that need to be switched.
3) Make a journal entry in QuickBooks to debit the JIB Receivable account and credit the Deficit account for the owners deficit balance being transferred.
4) Clear the owner's deficit suspense by adding a suspense history record or with the Clear Owner Suspense utility. Be sure to only clear the suspense for the interests being transferred that are in deficit.
5) If the outcome is not as desired, restore the backup from step one and repeat the process.

To switch an owner from JIB to Net:
1) Create a backup.
2) Remove the mark from the "JIB Int" option on the Division of Interest screen for the interests that need to be switched.
3) Make a journal entry in QuickBooks to debit the Deficit account and credit the JIB Receivable account for the owner's JIB balance being transferred.
4) Create the owner's deficit suspense by adding a new suspense history record. Be sure to only add the suspense amounts for the interest that is being transferred.
5) If the outcome is not as desired, restore a backup from step one and repeat the process.