BHP(Petrohawk) Royalty - Late Payments, Implausible Check Detail

Is anyone else experiencing this? Please let me know if this is happening to you. I am curious how many of us there are. Maybe we need to work together to get this fixed.

For me things started getting squirrelly in January 2018:

  1. No checks came in Jan, Feb or Mar. (Note: my monthly royalty is always more than $100.)
  2. The April check covered production for Oct, Nov, Dec 2017 and Jan 2018, but  the amount of production and the sales price for each month was identical to that for Sep 2017 - how is that possible?
  3. Checks came on schedule in May, June and July 2018, each with the exact same production amount and sales price as before - really? Looks like they are paying on estimates just to get the payments out.
  4. No checks came in Aug or Sep.
  5. The Oct check arrived on schedule, but still there were problems:
  • The check detail showed adjustments for production months Aug, Sep, Nov, Dec 2017 and Jan thru Apr 2018 (none for Oct 2017) but the detail makes no sense. For example, consider the prices listed for the adjustments:  Aug - $2.23 / Sep - $2.52 / Nov - $0.32 / Dec - $6.76 / Jan - $0.00 / Feb - $5.45 / Mar - $3.62 / Apr - $2.94. Do these prices seem plausible to you?
  • This check also included payment for production months May, June and July 2018, but each month has the exact same production amount and sales price. (Estimating again?)


LEASE BACKGROUND (Is yours similar?)

I leased my acreage to Petrohawk, but the well was drilled and operated by Samson Contour. So my royalty payments depended on Samson sending production/sales data to Petrohawk before Petrohawk would cut a check to me. Petrohawk paid OK, only with a month lag because of the data handoff. When BHP acquired Petrohawk nothing changed except my Owner Number and the signature on the check.

All went well until Samson Contour sold their Haynesville wells to Rockcliff (Oct 2017) which immediately sold them to Tellurian (Nov 2017).

Tellurian tells me Samson continued to operate these wells through Dec 2017 and that they (Tellurian) took over Jan 2018. They also tell me there were issues with the transfer of production/sales information from Samson during the transition period.

I know because I have interest in another property which I had leased to Samson Contour. Payment from Tellurian for that property resumed with a 5/26/2018 check including credible production details for Nov & Dec 2017 and Jan 2018. Payment for Oct 1027 production was included in the next check cycle without production details because the data transferred from Samson for that month lacked sufficient detail. So Tellurian is now current on this well.  Not so for BHP on the other well.

I raised these issues with BHP in Feb 2018 and with Tellurian in Mar 2018. Since then I’ve exchanged numerous phone calls and emails with both. It boils down to BHP saying Tellurian is not sending them the data they need and Tellurian saying they are sending it. Maybe both statements are true and the problem is either (1) something is amiss in the data being sent, or (2) BHP doesn’t know how to make use of it.  It has been 11 months now, and still no solution.

There is no excuse for this. Both companies already use oil & gas data exchange service providers specializing in inter-company data exchange. BHP uses Oildex and Tellurian uses EnergyLink. Either one of these service providers, alone or working together, should be able to implement a clean, reliable data transfer process from Tellurian to BHP.

So, any ideas on what can we as royalty owners can do to encourage BHP and Tellurian to get this fixed?

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Think about speaking loudly and carrying a small stick, V. Years ago, before the HA came along, Samson offered me a cheapo lease. I didn't take it. The landman was a city boy, he was too pushy, and the money was way low. Later, a much better operator came along, and I've been pleased with the mailbox money ever since. So here's my opinion. I think Billiton has a competent land dept. I've dealt with them for many years, and they do a reasonably good job, IMHO. Yet one time, per a co-drill, I had to wait quite a few months for the royalties to be sorted out between the Aussies and another big-dog operator. So I think your problem might be with Tellurian. Now, if you can't get it straightened out to your liking, maybe you should use a good O&G lawyer as your stick since the Louisiana AG won't do dip for you. Skip can recommend a top-notch lawyer in Shreveport. Good luck.

You will not have to deal with BHP very much longer.  They are packing up their bags and heading back down under.  BP may be your next operator if the sale goes thru.

Jay

Jay, do you think the newly permitted BHP wells in 23 & 26 16N 11W will transition easily over to BP? If you could offer a guesstimate, per this type of acquisition, what's the probability of BP spudding the wells within the next few months if the BHP/BP deal actually closes? 

Hard to say.  There are various reasons for alternate unit wells in this price environment.  Could be to satisfy mid-stream requirements, could be lease preservation, etc.  All companies have different factors for drilling additional wells in this price environment.  BP has been pretty active in the ETX HA, not so much in LA HA. 

Jay

Jay - I'd already surmised BHP was scaling down their Houston operations, but I didn't know BP was in the wings.  Thanks for the info. But Tellurian will still be the operator, so the data exchange issue will remain. Hopefully there is enough BHP joint interest operated by Tellurian to spur BP to get a resolution.  The question is, how many of Petrohawk's leases were drilled and operated by Samson Contour? If you know how to find out, please let me know.

Point well taken JJ.  Yes, my stick is small. The present value of my small interest is too small to justify the fee schedule of a good O&G attorney.  (I have a good one, but I engage him only for matters where the level of economic interest warrants the expense.) So, sure, by myself, I am merely an irritant and can just be ignored, although so far, that hasn't happened. They are working on it and I do get updates when I press for them; just no solution yet. But what if there are 20, or 50, or 100 royalty owners in the same boat? I don't know the threshold, but at some point, the aggregate interest would justify the attention of an attorney.  My post is an attempt to find out how may of us there are.  So far, it looks like none - at least, none who are scanning GoHaynesville.

So why the post?  To find out if

vigo, have you checked to see if there is a unit survey on file for your unit?  If so, it will list all the mineral owners with an interest in your unit.

Skip, actually, there is a unit survey and I already have it in my files.  Thanks for reminding me.  I haven't canvassed the group but there are fewer than 20 of us and, as Samson Contour controlled the unit, it can't be many who leased to Petrohawk.  I am only aware of three. My hope is that Petrohawk held an interest in a number of Samson-controlled units.  If not, then there are not enough small sticks to make the fasces we'd need to take action effectively.

vigo, you are probably right but I want you to know that I really appreciate the small sticks making the fasces analogy.  :-)  That ought to be good for a few google searches.  Hint to members: this is not industry jargon.

V., Ben is a good lawyer. In regards to getting some folks together in order to push things along a bit faster, that model has been discussed before on GHS, yet it never gets traction. Don't waste your time. Also, from reading your posts, I think you'll get the issue eventually fixed. Land departments sometimes move as slow as molasses. As I said, I one time had a delay in royalty payments, which was caused by two operators arguing over what was what. But it did get worked out. So just give it time.  

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