I identified the following seven strategic issues when I read the Pre-seen material.

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1 Beneath the surface YJ is a British Oil and Gas Exploration company. It specialises in drilling below the surface to find valuable resources to provide energy for the future, and then using them to gain advantage. This article tries to do the same as YJ. It seeks to explore the 16 pages of the Pre-seen material and to help candidates recognise some of the issues and themes in the case which the Examiner may draw upon to generate questions in the exams of February 25 and May In the exam you will be assigned the role of a management accountant working for YJ. You will be presented with 5 or 6 issues to sift through, prioritise, and to provide analysis and recommendations. Passing the T4 examination requires you to demonstrate techniques of management accounting and to give advice that is tempered by strategic, commercial, and ethical considerations. The T4 examination will not require you to produce a report setting out a future strategy for YJ. You are not a member of YJ s Board. But to help you put issues into context this article begins with a review of the big strategic issues that come to mind in when reading the Pre-seen. It speculates on the sorts of issues that you may face in the exam room. The Examiner presents a useful summary of business challenges on page 11, but I very much doubt that this is intended as a tip list of 8 topics for the two exams that will be based this Pre-seen. The strategic issues facing YJ I identified the following seven strategic issues when I read the Pre-seen material. 1. The impact of the new CEO and in particular his wish for faster growth 2. The financial constraints on YJ and how to relieve them to permit growth 3. The impact of gaining or failing to gain four new exploration licenses 4. Potential changes to the business model of YJ and their impact on financial returns 5. The risks being run by YJ in its global coverage 6. Maintaining proper health and safety in its operations and how to manage its operating risks 7. Recruiting and retaining motivated employees to meet YJ s growth Discussing these can help us to better see other parts of the Pre-seen in context. 1. The impact of the new CEO and in particular his wish for faster growth YJ was founded in 2005 by Oliver Penn but has been replaced by Ullan Shah from December 2013 (pages 5 and 13). Shah is the person who will bring initiatives for change that will create ripples, or waves, in the February and May 2014 exams. Shah has reviewed YJ s three active fields and twelve potential fields. He wants to identify and bring new oil and gas fields into operation at a faster rate than currently achieved (page 5). This faster growth is probably a response to pressure from the twelve institutional shareholders that own 96% of YJ s shares (page 4). Faster growth may raise its share price and enable YJ to move from the AIM to a full stock market listing. To date YJ has been successful in achieving its investors expectations (page 5) and this move to the full market would make YJ s shares more liquid, improve their value, broaden its access to new capital, and will allow the institutions to sell shares and realise large capital gains. Shareholders may be keen to do this because, to date neither the institutions nor the Directors have received any dividend income from YJ (page 5). We can see that the institutional shareholders buy and sell the shares of YJ and page 8 refers to share price volatility driven by expectations such as the performance of exploratory wells, the health of the CEO, and enthusiasm over the appointment of the new CEO. This means that the 1

2 institutional investors are key players and their interests will need to be considered in all business decisions. But YJ faces a number of constraints that need to be addressed if it is to grow at a faster rate than previously planned. YJ has limited finance for investment in new fields YJ has loans of $140m (for convenience $ is used instead of US$ throughout this article) and access to only $18.6m further funds (its $13.6m + overdraft facility of $5m). This should be compared to the $15m that it costs to perform a test drill (page 7 states this as the written off cost of test drilling in the disappointing DDD field) and it costs in excess of $30m to drill a production well (page 6). Page 4 of the Pre-seen puts this figure even higher, at $100m and even up to $500m for difficult locations. YJ has twelve potential fields under investigation with four of these due to require test drilling during 2014 (therefore potentially costing at least $60m based on the costs of DDD) and, eventually, much larger sums, perhaps around $400m, to take them into production if they are all found to be viable. This point is explicitly made on page 11 of the Pre-seen. Therefore, as stated on page 11, YJ needs additional finance. It will need more staff. For your exam you should anticipate questions that require you advise on the managerial and operational considerations associated with rapid business growth. This leads us on to discuss how YJ can get additional finance. 2. The finance constraints on YJ and how to relieve them to permit growth The Examiner confirms the importance of the need for YJ to gain finance on page 11 of the Pre-seen material. Several potential methods are identified: Securing additional equity finance. YJ has issued 10m of its authorised 50m shares. Therefore it can issue up to 40m further shares without undertaking complex legal formalities to increase authorised share capital. But who will buy them and at what price? The most likely buyers would be YJs existing shareholders who would have pre-emptive rights to be given first refusal on any new issue. Providing they are happy with the performance and prospects for YJ they would buy if the issue was suitably priced. In 2007 the shares were sold at $6 per share but now they are now worth $26.80 each (page 8) because YJ has earningsof $41m in 2013and proven reserves of 9,198m barrels of oil, and gas reserves of 12,780 million barrels equivalent (page 7) In addition to the calculations there are other factors to consider. The price investors would pay for YJ s shares is based on the outlook for YJ and their satisfaction with its management. Page 7 refers to the write-off from the failure of the DDD field as an acceptable risk because it was only one field. The share price will be affected by the success or failure of YJ in gaining the four licenses it has applied for. But given that YJ s investors may be asked to provide cash to support exploration of up to four new fields they will want to know how confident management is that the new fields will be viable. Knowing that Ullan Shah is hastening the pace of development might suggest that this would involve taking greater risks. Also the Directors may not be able to afford additional shares and therefore any new issue will dilute their interest in YJ. However, as the Directors currently own only 4% of YJ, any dilution of interest would not have any affect at all on control of the company. Securing additional loan finance. The main problem with loan finance is that it would strain YJ s cash flows. YJ was founded in 2007 and its first three fields were identified and surveyed in [YJ s] first few years of operation but only started producing oil and gas in 2011 (or for CCC, from 2012). Therefore there could be a two year period needed to find energy and possibly a further three year time lag between finding it and selling it. This means YJ would need to start paying interest on a new loan in 2014, but there would be no income from the new fields until they entered production in several years time. This income would only materialise providing the 2

3 exploration wells revealed viable reserves. An 11% interest rate is fairly aggressive and reflects the risks of YJ s business compared to the risk appetite of a bank, whereas the equity investors seem to be more accepting of the risks in E&P. It is doubtful that a bank would lend. The existing $140m loan was secured after YJ identified its first two oil and gas fields (page 5). The four fields are still being investigated by YJ s geologists and survey teams and are described as potential oil and gas fields This suggests that YJ would not be able to obtain loan finance for the test drillings at any of these four sites because providers of loan finance require the reassurance of, and perhaps a charge over, proven oil and gas reserves. However YJ currently has three operational fields, not two. The third field, CCC, came on stream in 2012, after the loan was obtained. YJ could seek to borrow against the proven reserves of this field. The Pre-seen material does not provide a separate account of the amount of these reserves. Cash from other operations. The statement of cash flows on page 15 shows that in year to 30 Sept 2013 YJ produced cash from operations of $64.1m but that YJ spent $47.2m on exploring its twelve prospective fields. This leaves it with just $16.9m free cash to contribute towards the $15m or so required to sink exploration wells in each of the four new fields (for which it has applied). Clearly YJ s operating cash flows are not sufficient to support its expansion. YJ may need to increase the rates of extraction from its three production fields. AAA seems to have failed to increase its output of oil or gas between 2012 and 2013 (page 16). However its licenses may not permit this. Or it may not be possible operationally to increase the rate of extraction without spending millions on drilling additional production wells to speed up production. Many governments with oil production industries, including four African countries and most Asian countries, are members of the OPEC cartel which may limit the extraction rate from the wells to bolster prices. A similar body, GECF, exists for gas exporting countries. Finally YJ may be obliged to conserve cash by reducing the amount of exploration it is doing and use the savings to hasten the four fields through to production. Farm-out arrangements. A farm-out arrangement is where the E&P company which has won a licence can assign or sell part or all of the field to another (usually larger oil and gas company) in order to generate cash for drilling costs. It also shares the risk. Usually the E&P company retains a majority holding in the field and sells in effect a fixed percentage, say 25%, of all future oil and gas generated in the field. Therefore the company that buys a share in the field pays 25% (or whatever agreed %) of the test drilling costs, the production drilling costs and the on-going operational costs and then is able to sell 25% (or whatever %) of the oil and gas produced. The company that buys into the farm-out arrangement also usually pays an upfront or annual fee for the privilege of obtaining a share of an oil and gas field without having to undertake the survey and licence application work. This approach would provide YJ with a boost to its cash flow. For your exam you should be ready to calculate share values, and to forecast costs, revenues and cash flows. Close inspection of page 16 shows you how to calculate YJ s revenues using data on oil and gas production, but you would need to be given a price per barrel for oil and gas in the unseen. 3. The impact of gaining or failing to gain four new exploration licenses The continued satisfaction of YJ s investors will depend on winning these licenses. Page 4 refers to institutional investors wishing to see long term growth in the share price, and YJ s share price leapt when it announced its finding of its first two viable fields (page 8). Presently the share price is high due to investors faith in the newly appointed CEO, Ullan Shah. 3

4 The wording on page 8 suggests that the investors hope that YJ will be granted all four of the licenses. But YJ is in competition with other E&P companies. YJ has a good record in winning licenses, having won three out of four since 2007 (page 7 eight licenses have been applied for, three have been won and four are still pending). This article has already explored the consequences of YJ being awarded the licenses, in terms of the financing and human resource problems it would create. Failing to get licences could lead to a decline in YJ s share price and dissatisfied investors. Shah would have failed his first test as CEO. He might need to reassure them by improving earnings from the existing fields and perhaps paying a dividend. Or he would need to accelerate work in the eight remaining exploratory fields to seek licenses there. This seems to raise the following issues. Suitability of YJ to be awarded the licenses. Page 3 identifies three criteria that governments will review when awarding licenses. YJ seems to have the required technical ability. It also has in place a detailed set of CSR policies (pages 9 &10). There is nothing in the Pre-seen to suggest it has a poor record in these areas. However this record could be updated in the unseen material on exam day and the Examiner has reminded of the threats from terrorism (page 10) and the Deepwater Horizon catastrophe (page 11). The Deepwater Horizon catastrophe was used by the US government in November 2013 as the justification for continuing to deny BP the right to obtain new contracts in the USA. The importance of CSR and sustainability is emphasised in a number of the business challenges facing YJ on page 11. This provides the Examiner with ample opportunity to set you questions that require you to evaluate and justify investment or action to safeguard these as an essential step to winning licenses to operate, and in consequence are essential to satisfactory financial performance. YJ looks weak against the third criterion of financial capacity. As we have seen, YJ does not at the moment have a financial plan to fund the exploitation of these fields. It seems possible that you may be requested in the exam to prepare a financial forecast and plan as part of the licenses application. This could involve recommending that YJ gains new sources of finance and support. Deciding which sort of license is best for YJ. Page 3 identifies two sorts of license. The simplest license is an exploration license, but this does not allow for production of the oil or gas. The second form is a production license which, it seems, covers both the exploration and subsequent production of oil. Applying for a production license after reserves have been found seems certain to lead to a bad deal for YJ because by then the government will know what the reserves are worth, and it will rightly assume that YJ will be desperate to conclude a production deal to makes profits to recover its costs of exploration and drilling. Given this, and the possible need to farmout production, YJ should seek production licenses with assignable rights. You could be asked in the exam to evaluate an offer from the government of one or other license. The detailed description of the calculation of profits at the foot of page 3 would suggest that the Examiner is considering setting you a question that asks you to calculate the profits from one of these PSAs perhaps to recommend its acceptance or rejection. But as a former student of P3 you should also alert the management to the sorts of risks described above and to recommend that safeguards and assurances are sought. Sadly the political systems of some countries with oil and gas reserves do not have the best track records in respecting international law and the conventions of business. The bribery issue. Page 4 refers to illegal payments to government officials to win licenses. The situation of YJ is very clear. As a UK company YJ, and its Directors, are subject to the Bribery Act This criminalises the offering or solicitation of bribes of any sort. The Act is emphatically against the bribery of public servants. Breach of this Act by YJ, regardless of the 4

5 country in which it occurs, will lead to fines against YJ and fines and/or jail for its Directors. YJ should have compliance procedures in place, have given training to affected staff. It should require all staff to declare any business gained by use of political contacts to a designed compliance officer within YJ. In the exam you must never support bribery and, if you are told it has taken place at YJ, you have a legal duty to do something that goes further than just your ethical duties under the CIMA Code of Ethics. YJ should have corruption reporting procedures in place that instruct you on whom to go to. If they do not exist than you would need to report it to the Serious Fraud Office (SFO). However if the information is cloudy and based on rumour you should avoid immediately reporting it to the SFO but rather report your suspicions, with evidence, to your line manager. 4. Potential changes to the business model of YJ and their impact on financial returns The business model of YJ was set by its founder, the previous CEO. This is described on page 4 as to explore, appraise and develop into production its licensed oil and gas fields. Ullan Shah seems to have made clear at his first board meetings that he wishes to continue this strategy (page 5). But page 11 makes clear that YJ cannot afford to do this for all twelve of its new fields unless it finds new sources of finance. This leads to a number of possible changes to the business of YJ. Use of farm-out arrangements. As described above, these are where YJ locates the oil, but sells a proportion or possibly all of the rights to another firm for a share in the licensed field. We are told that YJ has the requisite legal experience to do this (page 13). Farm-out arrangements may help YJ through its present cash shortages by raising funds from the sale of a proportion of the licenses on one or more newly licensed fields to permit the development of others. This could be analysed using the logic of the BCG matrix in which YJ can be seen to have three Cash Cows that generated $64m in cash in 2013, but are still insufficient to support all twelve of the Question Mark fields. The CFO, Orit Mynde, is aware of the problem (page 5) and he is your line manager in the examination. This provides the Examiner with the opportunity to set questions requiring you to advise Orit Mynde on which of the fields to farm-out after taking into consideration the cash needs of YJ, their timing, the likely reserves at each of the sites, the potential development costs, the risks and so on. At the moment it has an income stream from the sale of oil from its three operational fields where it uses hedging to reduce the volatility from world oil and gas price fluctuations (page 8). The more it relies on farm-out arrangements for cash then the more its earnings, and share price, will become dependent on it success in identifying viable new fields. But some risks are reduced because it shares test drilling costs with another firm. A potential exam day outcome could be that YJ seeks to develop a field in conjunction with another firm in order to share the costs of investment. Setting unseen material to include this development would enable the Examiner to ask you to suggest relative shares, and to discuss the managerial and operational impacts of a joint venture. Glancing down page 13 indicates that YJ s success has been based on the inspirational vision of the former CEO, Oliver Penn, which seems to have been one that valued YJ s independence and certainly attracted the CEO. The Director of Drilling, Adebe Ayrinde, is also not a fan of large international energy firms. An offer to acquire YJ, in part or entirely, could be an outcome on exam day. This would enable the Examiner to require you to undertake a business valuation, and to discuss the value of the acquisition as a way to relieve the capital shortage at YJ and also, perhaps, to speed up its process towards the full market is the buyer was already listed, or perhaps the combined entity would be large enough to be attractive on the main market. 5

6 5. The risks being run by YJ in its global coverage The November 2013 T4 examination required candidates to produce a risk assessment of the firm in the unseen material. The energy industry is also riven with risk. This article has already explored the risks YJ runs due to the uncertainties of whether its exploration activities will yield viable oil and gas reserves. Later we will consider its operating risks. Here let s look at the risks it runs from the countries it operates in. YJ presently operates in the continents of Africa (field AAA) and Asia (fields BBB and CCC). All three currently operational fields are all shallow-water locations. None of YJ s sites have been expensive deep water drilling locations. The four new licenses are for fields in the same two continents. Political risks. In February 2008 BP announced the abandonment of its hitherto successful drilling operations on Sakhalin Island, on Russia s Pacific shoreline. In 2012 it sold its interests to the Russian state-owned energy firm Rosneft. Defending its initial investment in 2008, the Chairman of BP made clear that there were few good country choices for oil and gas firms in the world, and pointed to the potential instability of the Gulf States, such as Iran and Iraq, the potential instability of some African states, and the sometimes aggressive policies of the Russian government. According to global research firm PFC Energy, only 7% of the World s oil and gas reserves are located in countries which permit companies free-reign in how they operate. Firms like YJ are subject to the risks of new taxes on extraction, political interference in operations, and withholding taxes on dividends from subsidiary firms in each country. They are also subject to the risks from civil and political upheaval (for example the Arab Spring affected several oil producing countries in North Africa and in Asia), political overthrow of friendly governments, embargoes by other nations on the exports from energy producing countries, and potentially the nationalisation and sequestration of its assets in a country. Energy firms seek to manage these risks by diversifying the countries from which they get energy, operating non-market strategies aimed at keeping in favour with the host governments (and their opponents), and maintaining CSR policies to minimise the potential fall-out from their operations which might otherwise provoke a host government to act against them, as the USA did with BP following the Deepwater Horizon deaths and subsequent huge oil spillage. One reason that energy firms exploit fields in inhospitable locations such as deep water, the Arctic and so on is because they may be situated within the territories of business friendly governments. That said, at the time of writing, a hot topic seems to be the question of which country, if any, owns the North Pole and the Arctic Ocean. Economic risks. The price of energy is affected by the market forces of demand and supply which, in turn, depend on the state of the world economy, such as recession or boom, the development of emerging nations, and the policies of international bodies such as cartels to regulate output or pass legislation on emissions and so on. In the short to medium term this price volatility can be hedged, as YJ does (page 8), but in the long-run it cannot. This is a double-edged sword for firms like YJ. The increased long-term demand for energy coupled with a future shortage of oil and gas will push prices up. So this should increase YJ s profit, but long-term hedging would reduce its ability to benefit from price rises because it would be obliged to sell at its contracted price. YJ is exposed to foreign exchange risks, as stated on page 6, because its revenue is subject to the volatility of the US$ whilst its costs are in UK, African and Asian currencies. Some oil producing countries will peg their domestic currency to the US$ because it is their main export earning, but others do not. The latter are more risky for YJ. Social risks. Energy firms are accused of many evils ranging from disruption of local villages and destruction of the natural environment in the vicinity of their operations, through pollution of water 6

7 and land from leaks and spills, to being the main cause of carbon emission and consequently hastening global warming. It should be noted that oil is regarded as a dirty fuel whereas natural gas is a clean fuel because it does not release carbon when burned. Some other technologies are also particularly criticised, for example the hydraulic fracturing referred to on page 2 is better known, in the UK at least, as fracking and there are fears that it may pollute water sources and even to lead to earthquakes. Social risks impact on energy firms through the badgering of regulators to move the goalposts for energy firms through to direct action by local communities to block access to an area, mount costly legal challenges, or direct action to harass the firm, its employees and its contractors. For example the Arctic 30 Greenpeace activists jailed then pardoned for their 2013 actions against Russian energy operations in the Arctic. Ensuring the security of operations and staff. On page 10 we are told that YJ employs an international security company. Critics of energy companies sometimes refer to these as private armies on account of their alleged behaviour in some places. I doubt the T4 Examination would feature the worst extremes of direct action by either side, but I would not be surprised to see questions that require you to evaluate or justify expenditure on non-market strategies by YJ, or to advise on the ethical aspects of them. 6. Maintaining proper health and safety in its operations and how to manage risks YJ is subject to many operating risks. All three of YJ s operating fields are off-shore (page 7). The four new licenses are on on-shore and off-shore land (page 7). You can probably make a list of the respective risks of each type of location. The Examiner singles out test-drilling in off-shore locations as being particularly subject to risk (page 9) which suggests an intention to ask you to evaluate this. The industrial towns at sea created by off-shore operations suffering the risks of higher initial costs (page 4 refers to deep water locations being extremely expensive), storm damage, piracy, and of course the profound damage to marine life and fishermen s livelihoods from spillages, leaks, and escapes of oil. YJ is entirely reliant on subcontractors for its drilling operations and the handling of oil and gas with a small team, drawn from its total staff of 200, managing and supervising operations. This means that the main procedures for managing operating risks will relate to the selection of contractors and the supervision of how they manage risk. The Deepwater Horizon catastrophe provides an example of the complexity of this. Blame for the explosion and spill has been laid at the door of BP on account of its 65% ownership of the exploration rights of the reserves off the USA s coast of Louisiana, jointly with US and Japanese partners. The rig was operated by its owners, Transocean and at the time of the explosion only 7 of the 126 crew were BP staff, with the majority being Transocean staff. The rig exploded, killing 11 crew, and sank to leave a gushing oil well, leaking oil underwater that took 87 days to stem, resulting in the release of 4.9 mmbbl of oil into the ocean that devastated marine life and the livelihoods of fishing industries on the Louisiana coast. Investigation and litigation continue but in 2011 blame was placed by US government on BP and two of its sub-contractors. This ruling cited poor design of well caps, lax operating procedures, and HSE shortcuts. The point for the YJ case being that many of these were operated by subcontractors who, despite pleading guilty, have still left BP liable for inadequate supervision. The length of time it took to cap the well, and some poor public relations by BP, led to huge fines, the resignation of its CEO, and its effective banishment from further business opportunities in the USA. YJ needs to vet its contractors, monitor safety closely, and to have good legal agreements in place to ensure that contractors pay for their errors. It needs a PR response to potential HSE and CSR emergencies. The risk management policy of YJ is outlined on page 10. You are not 7

8 expected to be an HSE expert in the examination. But you could be asked to evaluate expenditure on HSE improvements, perhaps to the IT systems mentioned on page 9, or to review metrics for HSE and CSR. Note also the risks to YJ s staff which necessitates that they be escorted by security companies (page 10). I recall being the guest of an energy firm developing reserves in Asia and of how the expatriate staff lived in a bubble of special apartments and guest houses and travelled in cars with armed drivers to reduce the risk of kidnapping and ransom. I enjoyed the same protection. I daresay the risk to me was of being shot by my potential captors in the disappointment at realising that instead of a rich oil man they had kidnapped a CIMA lecturer! 7. Recruiting and retaining motivated employees to meet YJ s growth YJ is a flexible firm that outsources all its drilling work (page 7) and hires large items of capital equipment (page 6). Therefore there may not be a shortage of these at present. But given Asia s hunger for energy, alluded to in the Pre-seen on page 2, there may be an increased demand for the services of these contractors leading to shortages of capacity and higher costs. The management and supervision of operations at the three existing fields is undertaken by YJ s fulltime staff and hence more employees will need to be recruited if licenses are won for the four new fields. Recruiting a suitable workforce is cited as one of the business challenges facing YJ (page 11). Some other issues I have tried to cover as many issues as possible within the context of the seven strategic issues that I have identified. This does leave a few remaining that I noticed in reading the Pre-seen material, and for which I think you need to be ready on exam day. 1. Directors shareholdings The former CEO still holds 200,000 shares (page 13). The new CEO is planning to buy 200,000 shares on the market in early 2014 (page 5). Don t go into February exam without having first revised how to value the shares of YJ and perhaps suggesting that the new CEO might offer to buy the shares of the former CEO. Be ready to do a calculation using a new share price, assuming that the former CEO is a willing seller. There are also potential ethical issues here, for example the new CEO might have knowledge of reserves or license applications that the old CEO doesn t. Or perhaps you may feel that preparing this calculation in some way compromises your objectivity or integrity as a CIMA member. Two Directors do not own shares according to page 13. The other Directors purchased theirs. So these two remaining Directors could buy shares from the market or YJ could issue 100,000 or so new shares and sell to them. Once again these buyers might be in a position to know about oil reserves or risks that the market doesn t, and so an ethical issue would arise for you to discuss. It may be worth you revising the Efficient Markets Hypothesis (EMH) and being ready to explain that the strong form is unlikely to apply to an AIM quoted firm due to lack of detailed analysis from analysts and its thinly traded shares. Therefore the market price may not instantly reflect all information known to the Directors and affecting the prospects of YJ. 2. Budgets and control Previous T4 exams have set simple requirements for the management accountant in the firm such as to construct a tender price, or to review a budget and recommends suitable controls to ensure it is enforced. Don t be surprised to get, amongst other requirements, something as nonstrategic as this. 8

9 3. Part (b) The T4 examination will require you to write a report identifying, prioritising, analysing, and evaluating the issues facing YJ and which makes suitable recommendations with justifications. These issues will be the ones explicitly provided to you on exam day, and not the ones I have speculated on in this article. But I hope that I have spotted a few general areas that may come up. Your report is worth 90% of the marks. Part (b) of the exam is a requirement that you provide a small piece of communication alongside your report. The skill being tested is your ability to explain things simply. It is worth 10% of the marks. In the past this has included the requirement that you prepare a graph from data that you calculate. Page 16 of the Pre-seen material shows an example of this. I would not be surprised to see you asked to prepare a similar table and pair of graphs for future oil and gas production. In the February examination all candidates will be sitting the exam on a PC and therefore will need to know how to use Excel to create the graph. In May there will be both PC and conventional sittings of the exam. Don t assume that the graph would only be set in the February exam. Therefore ensure you can draw it in Excel if you are sitting on PC, and if you are sitting conventionally please take your geometry sets to the exam with you. Part (b) is a communication document and you, as YJ s Management Accountant, may be required to explain or persuade the YJ Board about a possible course of action. Passing the exam As you can see, the Examiner has written a Pre-seen that is rich in opportunities for questions in the exam. Here is a round-up of the potential questions I have identified above: questions that require you to advise on the managerial and operational issues considerations associated with rapid business growth. calculation of share values, forecast costs revenues and cash flows questions involving the process of applying for licenses including a financial forecast and plan as part of the licenses application. discussion of a farm-out arrangement or joint venture with another oil and gas company to gain finance and support calculation of the profits under a PSA and recommendations on its acceptance or rejection as well as alerting management to the sorts of risks involved dealing with bribery if you are told it has taken place at YJ questions requiring you to advise Orit Mynde on which of the fields to sell a proportion of in the form of a farm-out arrangement advising on acceptance or rejection of an offer to acquire YJ, in part or entirely production of a risk assessment of the firm questions that require you to evaluate or justify expenditure on non-market strategies by YJ, or to advise on the ethical aspects of them evaluation of expenditure on HSE improvements or a review of metrics for HSE and CSR valuation of the shares of YJ and the ethical issues raised by insider knowledge constructing a tender price, or to review a budget, and making recommendations for suitable controls to ensure the budget is enforced. preparation of a table or graphs for future oil and gas production construction of a budget and cash flow forecast relating to drilling costs discussion of ways to recruit and retain employees to meet YJ s growth plans 9

10 To pass the exam you need to read the Pre-seen and become familiar with it. Also have a look at the industry, perhaps by looking at websites such as to help make the case more real for you. You should read the past exams and Post Exam Guides on T4 to understand what that Examiner wants from you in order to help you pass. You should also invest in some quality tuition, and especially some mock exams written against the YJ Pre-seen material. It s important to do some of these against the clock and to get them marked. Doing mocks will help you to build a robust way of approaching the exam so that, whatever the Examiner set on exam day, you can deal with it. Good luck! Adrian Sims is a freelance lecturer and author who teaches T4 internationally for CIMA and for a number of tuition colleges in the UK and Ireland. adrian@adriansims.com 10