Replies to This Discussion

Permalink Reply by Grillin' - MmmMmm on August 21, 2008 at 2:51

As a WI owner you should have a JOA that dictates what they can charge you. The overhead is generally allowed via COPAS. And the direct payroll, phone bills, truck expenses, etc., as long as they are used on the operation of the properties/assets are fair game. Also, why shouldn't you pay your share of the salt water disposal system? That is a legitimate cost to get your gas/oil to the market.

Now if you were a royalty owner, you wouldn't be. As an unleased minerals owner, you would also be liable for these expenses.

I do agree that auditing and keeping on top of all of this is not as easy as it would seem. The idea of sticking with more reputable ccompanies is a good one. We have policies and systems in place that look for the graft and corruption you mentioned. Internal auditors are kind of like Internal Affairs on the police force. In the past, these shennanigans were common. Nowadays they are not the norm.

If you question some of the invoiced charges, bring them up. Remember, being a royalty owner or an unleased minerals owner is a job. You have to review the checks and the statements. Point out the problem. The companies don't like people tieing up their people's time with phone calls, questions, etc. If you are persistent and keep bothering them, they will try and fix the problem. They may offer to buy you out at a premium. I've done that several times just to get rid of the accounting. One well had 62 royalty owners and 45 WI partners. An army of accountants couldn't keep all that straight!! As we die and leave our property to our heirs, then they die and leave it to their heirs and so on, ownership gets convoluted.

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Permalink Reply by drillbit on August 20, 2008 at 12:33

The IRS has a few publications online concerning oil and gas entity accounting, you might want to have a look at some of these. If an entity is not abiding by what is allowed by applicable statutes, the IRS might have an interest. If some of the companies are as bad as people imply on this forum, their person calling the shots could wind up at the Barbwire Hotel with a roommate named "Bubba".

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Permalink Reply by BirdDawg, plain ole' idiot on August 21, 2008 at 0:30

Drillbit,
Thanks for that info. My partner and I have ofter discussed this very topic, but never have actually checked in into it. But please believe me, I think their are things even worse than what I mentioned that have gone on. And gone on for years. Please understand, I am not necessarily anti-oil and gas. Unfortunately I got hooked up with a small independant that is a master at this game and has been doing it for many years. We have often discussed the fact that some of the people involved in this could possibly end up in jail. I am certianly not implying that this an industry - wide scenario. Thanks

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Permalink Reply by Keith Mauck (Site Publisher) on October 27, 2008 at 7:02

Jed Clampett, here is a good discussion on unitization...

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