Energy companies operate under accounting rules that differ from most other industries. Todd Muslow, a certified public accountant in Shreveport, Louisiana, began his work in the assurance practice at KPMG LLP, where he focused on oil and gas audits for public and private companies. That background shapes how he advises operators, service companies, and investors working in the sector today.
One of the first distinctions owners encounter is the choice between two methods of accounting for exploration and development costs. The successful efforts method capitalizes only the costs tied to wells that produce, expensing the rest. The full cost method capitalizes a broader pool of costs across a defined geographic area. The choice affects reported earnings, asset values, and how results appear to lenders and investors. Todd Muslow explains that the method should reflect the nature of the operation and remain consistent once selected, because switching methods complicates comparison across periods.
Depletion is another concept specific to extractive industries. As reserves are produced, their cost is allocated against revenue over time, similar in principle to depreciation but tied to the physical reduction of a resource. Calculating depletion requires reliable reserve estimates, and those estimates change as wells are drilled and production data accumulates. Accurate records of volumes, costs, and reserve revisions keep the calculation defensible.
Revenue recognition in oil and gas carries its own complications. Production is often shared among multiple working interest and royalty owners. Division orders, joint interest billing, and revenue distribution statements all require careful tracking. Todd Muslow notes that errors in allocation can create disputes among partners and expose an operator to liability. Clear documentation of ownership percentages and consistent application of those percentages reduce that risk.
Joint operations introduce further reporting demands. When several parties share the cost and output of a property, the operator bills nonoperating partners for their share of expenses through joint interest billings. Those statements must be accurate, supported, and issued on a predictable schedule. Todd Muslow advises operators to treat joint interest billing as a discipline rather than an afterthought, because the quality of those statements affects relationships with the partners funding a project.
Tax treatment adds another layer. The industry has provisions that do not apply elsewhere, including the treatment of intangible drilling costs and percentage depletion. These rules can produce significant timing differences between book and tax reporting. Regulatory and environmental obligations also affect the books. Asset retirement obligations, which estimate the future cost of plugging wells and restoring sites, must be recorded and updated. These liabilities can be substantial, and ignoring them distorts the financial position of a company.
Across all of these areas, the common thread is documentation. Reserve estimates, ownership records, cost allocations, and retirement obligations all depend on records that hold up under review. Todd Muslow draws on his audit background to emphasize that energy accounting rewards consistency. Methods applied the same way each period, supported by clear records, produce statements that owners, partners, and lenders can rely on.
For business owners entering the sector or expanding within it, the practical step is to establish accounting practices suited to the industry from the start rather than adapting general bookkeeping after problems appear. Todd Muslow works with energy clients to build that structure early, connecting industry-specific reporting to the broader goals of tax planning and financial clarity.