Underlift position

An underlift position arises when an organization owns a partial interest in a producing property and does not take its entire share of the oil and gas that is produced in a period. In this situation, there is an imbalance in the apportionment of oil and gas produced, so the firm recognizes revenue based on its ownership share of production in the period, as well as a receivable for any oil and gas shortfall (an underlift position) or a payable for any oil and gas overage (an overlift position). For crude oil imbalances, this receivable or payable can be recorded at the related production costs, market value, or the actual sales proceeds received. For gas imbalances, the SEC has stated that the receivable or payable can be recorded at the lower of the contract price, the current market value, or the price in effect at the time of production.

Related Courses

Oil and Gas Accounting