Client Overview
Our client is a UK based startup in the oil and gas sector with international exploration interests. They have secured significant levels of private equity investment for new work in emerging regions where historically exploration activities have not been successful for a variety of reasons. Our client purchased a number of exploration licenses from third party oil companies and international governments to establish the prospectivity and feasibility of oil production. They intended to invest over half a billion dollars in this venture, aiming to generate substantial return for the investors and unlocking the full potential from regions that had previously not been tapped into fully.
Problem Statement
The client were unaware of R&D Tax Credit schemes and initially did not believe they could be eligible. The standard perception of “R&D is something that happens in labs with people in white coats” was very much applicable to them. Therefore the first step was to build awareness of the R&D tax credit scheme within the organisation.
The client employs very highly skilled staff with over 20-30 years of experience in geology, geoscience, reservoir engineering, petrophysics and project management. With their vast experience, the starting position was that they were not doing anything that they would consider “groundbreaking” or “revolutionary”.
ResearchQX presented the opportunity for claiming R&D tax credits to the client and, after several rounds of discussions with various stakeholders, they appreciated the merits of evaluating the process further. Therefore, ResearchQX were engaged to prepare the claim.
Our Process
The first step in our process was to raise awareness of the R&D tax credit system within the client organisation and help them to appreciate the full extent of the scheme’s eligibility requirements. Several meetings were held with the client’s technical staff to discuss the BEIS R&D eligibility criteria and how they could be applied to projects in the oil and gas sector.
Gradually, the client’s technical staff shifted away from the perception that R&D claims were not for them and were able to clearly articulate the myriad of technological uncertainties they faced on their exploration projects. They uncovered multiple examples of how inadequate seismic data and noise required them to develop new techniques and methods for better simulation and imaging; how advanced concepts such as polymer injection in oil fields could drive better permeability (and the associated big data model/simulation to enable visualisation); how the poorly understood subsurface characteristics impacted modelling and reservoir development.
With these strong examples of technological uncertainties and qualifying R&D work, the client were able to appreciate the extent of the R&D incentive system. Detailed technical reports prepared by the ResearchQX team were highly appreciated by the client’s technical team.
A comprehensive report outlining all the R&D activities was prepared and submitted to HMRC and the claim was approved within 4 weeks.
Key Metrics
The client received a substantial sum of money through the R&D incentives scheme. As a pre-revenue start up organisation, the cash flow generated from R&D claims was a much-appreciated Development within the organisation. With the continued operational challenges of needing to justify expenditure to investors at all stages, the cash from R&D claims was instrumental in enhancing the effort on technical activities related to exploration. The company secured nearly £1 Million through the claims over a three-year period.
