Replies to This Discussion

Permalink Reply by Bobi Carr ("parker") on August 28, 2009 at 19:28

Bar ISW,

Petrohawk is leasing quite a bit of property in your area.

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Permalink Reply by lanadan Ds3 on August 24, 2009 at 22:53

Mac Davis,

Your statement " . . . There's more opportunity to CHEAT the Unleased Mineral Owner (UMO) than a leased owner than a leased mineral owner . . . " is interesting.

Question : Jusr HOW is the operator going to do this ? Please explain.

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Permalink Reply by Mac Davis on August 25, 2009 at 5:20

Question : Jusr HOW is the operator going to do this ? Please explain.

lanadan, we've beaten that dead horse before in other threads.

Royalties get paid mostly based on production volume and price plus royalty rate.

UMO payments start from that same input accounting data, then get deductions for well costs, operating costs, management fees, and maybe a few other accounting items.

lanadan, do you honestly think that there isn't more opportunity to cheat a UMO due to the additional deductions a UMO takes than there is for a leased mineral owner?

There are lots of opportunity for fraud here. They can double count certain expenses, add expenses that aren't allowed to be deducted from UMO payments, charge expenses to the wrong well, etc. Well costs alone probably have literally thousands of line items. Most of these items will probably be something that the UMO is not familiar with and can't verify. There are lots of posts here on GHS where UMO's report a statement from the O&G company that has deductions for items they're not allowed to deduct. That's even before the start really creative semi-legal accounting tricks it would take an in depth audit to find.

Maybe someone should start a concise "How to defraud a UMO" thread, but let's not hijack this thread.

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Permalink Reply by The_Baron on August 26, 2009 at 4:04

Not to hijack your thread, but some legitimate expenses that are extremely vaugue and almost imposible to disprove could fall under the catagory of "including a charge for supervision".
It is not unusual to just line item this as overhead or supervision charge. Also, consider that the operator will be billing time from employees who are working on the required forms and filings to DNR and LDR. I wouldn't go as far as saying that this is fraud. But there are expenses that may be leagl and legitimate that you as a UMI would not agree with.

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Permalink Reply by KAYBABY on August 25, 2009 at 2:58

ask for at least $5000 Also, you may get a little more if you own big acreage

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Permalink Reply by lanadan Ds3 on August 26, 2009 at 0:33

Louisiana RS 30:103.1(A) specifically says that reports

" . . . shall issue the following reports to the owners of said interests (UMI/UMO) a SWORN, detailed, itemized statement . . . " .

Notice the word "SWORN", as in sworn testimory. If I were an operator, the LAST thing I would get involved in is trying to 'splain to a judge expenses that DO NOT, by reasonable interpretation, fit in a report of this nature.

As an UMI, I assure you that I have an attorney "waiting in the wings", so to speak, that would have a field day with this ! !

And furthermore, with all the positive spin on this site touting the honesty of the O&G industry -- we're supposed to TRUST these people ? PUH-LEEEZE ! !

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Permalink Reply by Mac Davis on August 26, 2009 at 4:32

Lanadan, I don't see why you're objecting. I'm saying that anyone going UMO needs to watch the accounting carefully. I'm also saying that a UMO has to watch the accounting more carefully than a leased mineral owner.

Does anyone disagree with the above?

If you don't believe they'll fudge the numbers on SWORN testimony, why bother to have an attorney waiting in the wings?

As for "SWORN" statements, companies are expert at spreading the blame around, setting up fall guys, creating reasonable doubt about incompetence vs. honest mistakes vs. fraud, and balancing cost and probability of getting caught vs. the profit of shady business practices. Usually, when a company gets caught in wrongdoing, nobody goes to jail, and the fines are a pittance compared to the profits for all the things they did wrong and got away with.

Look at Enron, Arthur Anderson, Bernie Madoff, Wall Street in general, etc. They're just the guys who got caught, and look at how long they got away with it and how many people they defrauded.

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Permalink Reply by BirdDawg, plain ole' idiot on August 26, 2009 at 5:23

Mac,
I agree with you. I have some copies of joint interest billings which I recieved as a working interest owner on some wells. From what I have heard on here, many of the items on the bills were not allowable expenses. I will try to block out some names and other pertinant info to prevent anyone from identifying the operator, and try to scan it and post it so people can see what we are talking about. I can assure you that these guys are hardly scared of the "sworn testimony" deal.

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Permalink Reply by lanadan Ds3 on August 26, 2009 at 22:24

Mac,

" . . . a UMO has to watch the accounting more carefully than a leased mineral owner. . . "

And still the question begs an answer: that is, just WHY, in your opinion, is this so ?

Are ALL landmen/operators/et al simply a bunch of liers, cheats and thieves ? You seem to imply that.

As a UMI I may indeed get "fleeced" but it won't be with my permission (i.e., signing a suspect lease). Oversight measures are in place that one can fall back on. If not, then everone simply needs to "belly up", sign over 100% of their minerals and be done with it.

This is the same old threat (and, yes, that is exactly what it is -- a THREAT) that was put to me YEARS AGO (pre HA) that if I don't sign a lease then I would get "pencil whooped" with expenses and get nothing.

As the comedian Foster Brooks used to say on the old Dean Martin show, that's " . . . pure cockypop " !

Again, can I get a witness ?

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Permalink Reply by The_Baron on August 27, 2009 at 3:24

The fact remains that a royalty owner, that is someone who is leased will have very simple oversight of making sure they get their % of production, especially if they have a cost free royalty.

The UMI will find that they have no real recourse in challenging many costs related to the supervision of a well.

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Permalink Reply by The_Baron on August 27, 2009 at 3:26

You could also be bent over with a marketing agreement. take the terms they propose or just take your gas in kind.

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Permalink Reply by Mac Davis on August 27, 2009 at 7:31

How does "gas in kind" work, Baron?

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