Managing more than 550 wells and 100,000 acres of land in the mid-continental U.S. is no simple task, but Mustang Fuel Corporation has earned a reputation for energy excellence in part through its ability to successfully adapt to ever-changing industry, economic, and technology environments.

Based in Oklahoma City, the privately held company’s current-day operations include oil and gas exploration and production, natural gas gathering and processing, and natural gas marketing. Founded in 1949, Mustang Fuel is one of the mid-continent’s leading independent oil and gas companies—and, as it recently celebrated its 70th anniversary in 2019, became a cloud-based industry leader by implementing SAP S/4HANA.

In successfully migrating to the cloud, the company unlocked business efficiencies and transformed its production revenue accounting processes, according to Kyle Hobbs, CPA – Controller at Mustang Fuel, who joined the company in 2016. He will discuss its transformation story at next month's ASUG Best Practices: SAP for Oil, Gas, & Energy conference (Sept. 14-15; in Dallas, TX; learn more).

“Utilizing our core system’s technology through SAP is now part of our normal process,” Hobbs told ASUG. “Much of our accounting staff is new since 2019. They don’t even know how long things used to take.”

Securing the Future

Mustang Fuel first implemented SAP on-premises in 2010, adopting SAP ERP Central Component (SAP ECC) and running that instance until 2019, when executives decided that an upgrade was needed to streamline production revenue accounting (PRA) and drive competitive edge.

“As part of the move to SAP S/4HANA, we sought to secure our future ERP operations and avoid costly customizations,” said Hobbs. “The most pressing need was in production revenue accounting, where we eliminated multiple manual processes and time-consuming updates to the business warehouse.”

Specifically, within production revenue accounting, Mustang Fuel sought automation functionalities including calculations of production depreciation and gas balancing, escheat management, and Office of Natural Resources Revenue (ONRR) reporting.

Evaluating its PRA roadmap, as well as an SAP S/4HANA implementation, executives were aware they hadn’t utilized various ECC enhancement packs or upgrades in the past and decided to move forward by pursuing cloud migration. “We made the decision to move to SAP S/4HANA and implement a PRA roadmap at the same time,” Hobbs said.

Ultimately, Mustang Fuel saw three opportunities with cloud transformation: to enhance its PRA processes by automating procedures using the SAP PRA module; to move from a legacy on-premises database to a full cloud solution; and to design a road map for step-by-step improvement of financial processing using a database with both transactional and analytical processing in memory.

From Overcomplicated to Industry Standard

From a resource standpoint, executives knew that an early migration to S/4HANA would be beneficial to the company and avoid overburdening its small support staff with time-consuming migration requirements later on, after SAP discontinued support for general ECC environments.

In consultation with Ernst & Young (EY), with its deep knowledge of both the oil and gas industry and SAP technology, Mustang Fuel initiated its 11-month journey to S/4HANA, successfully moving its SAP environment to Microsoft Azure, a popular system host for cloud SAP solutions. Mustang Fuel went live in November of 2019, following a three-day system conversion.

One major push during the SAP S/4HANA migration, according to Hobbs, was to adapt Mustang Fuel’s business processes to the world of cloud ERP. “Our utilization of ECC software wasn’t what it should have been,” Hobbs noted, with Mustang Fuel not having implemented all updates to its on-premises ERP system and struggling with an overly customized (and thus “overcomplicated”) technology landscape. As a result, eliminating several third-party customizations was a priority to reduce the complexity of future upgrade efforts.

“During our conversion, we took out certain customizations and tried to standardize,” Hobbs said. “We really tried to look at our business processes and our customizations and say, ‘Are we complicating the software by trying to fit our business process, instead of just looking at our business process and adjusting that to utilize the software better?’”

“We’ve Saved Days”

Mustang Fuel has seen significant improvements in production revenue processing and reporting since implementing S/4HANA and following best practices recommended by SAP. Its converted PRA process is no longer dependent upon manual inputs to use values from the production module of automated system value functionality in its monthly revenue distribution.

“We’ve saved days through utilizing system value and utilizing PRA to reduce the manual inputs we had been doing,” Hobbs said. “We continue to reap benefits there.”

Standard financial processing at Mustang Fuel now integrates in-house, customized product depreciation calculations, as the company continues to move toward automation in bank reconciliation and various accounts payable processes. Monthly, Mustang Fuel saves an estimated 4-8 hours in the calculation and processing of escheat payment, and 24-32 hours through automating the flow from product value to revenue to gas balances. Additionally, it estimates 12-16 hours in time savings through automating royalty reporting to ONRR.

According to Hobbs, Mustang Fuel has doubled its property count and added to its well count since 2019, without needing to dramatically increase staff. “That wouldn’t have been possible if we hadn’t made those changes and recognized enhancements that came with migration to S/4HANA,” he said,

Mustang Fuel is still looking to improve its financial reporting processes, including those around SAP Business Intelligence (BI) reports. In the “old days” before S/4HANA, Hobbs said, it took two hours for BI reports to update after entries were posted, as employees had to wait for the company’s SAP Business Warehouse (BW) to refresh. “We were limited by the system,” Hobbs said. “Now, if we make a change, it’s immediately posted.”

Still, Mustang Fuel seeks to update its approach to financial reporting, perhaps through SQL servers that will allow its controllers to pull in different non-SAP data sources and link them together. “We’re looking for a mechanism to combine data sources for our gas processing plant accounting with SAP data, to do not only financial reporting but also set up forecasting mechanisms,” Hobbs said. “We want to be able to utilize that database and attach it to whatever external resource we want to use, be that Spotfire or Power Query in Excel.”

Change Management: Teaching Teams to Fish

Amid Mustang Fuel’s transformation, Hobbs has learned the business value of change management and continuous education for employees across his organization. With new hires coming into his company, the question Hobbs always asks as a guiding principle is, “How do we navigate change and share knowledge around where to get information and how to execute within the system?”

For Jimmy Nummy, Assistant Controller at Mustang Fuel, who joined the company last year, leveraging SAP S/4HANA to its fullest extent has only been possible because of Hobbs’ efforts to build a knowledge base across the company and demonstrate how to navigate SAP systems most effectively.

Cloud transformation impacts more than just IT departments. One of the bridges Nummy has worked to build, between accounting and IT, can be summarized by a classic proverb: “Give a man a fish, and you feed him for a day; teach a man to fish, and you feed him for a lifetime.” At companies with finite IT resources, ensuring other departments can learn how to access data and navigate processes, he said, is essential to freeing up IT for more high-level building and coding.

In attending the ASUG Best Practices: Oil, Gas, and Energy conference in Dallas to share Mustang Fuel’s story, Hobbs and Nummy said they hope to gain key insights from others around standard SAP configurations and processes that could be applicable at Mustang Fuel. That’s why their session, “The Good, The Bad, and the Ugly: A User’s Experience with SAP Software,” will serve as an open dialogue around how to know if users are utilizing their SAP instances most effectively.

Both Hobbs and Nummy believe they have wisdom to impart as well and agree that what Mustang Fuel’s team learned about customizations throughout their S/4HANA journey could be relevant to others considering or pursuing digital transformation. “Evaluate whether you’re making the system complicated in service of areas that don’t provide any value,” Hobbs said. “Part of preparing for the future is utilizing and analyzing best practices to support your business.”

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