How can you verify that the operator is paying you correctly on your royalty----

The decimal interest is correct on division order. How can you obtain itemized statement showing all details of NG price the operator received and all deductions taken out or if royalty free clause in lease are you getting gross price minus only taxes. Is operator required to give you this information on your written request? Is email considered written request? Is this a normal recommendation royalty owners should due? I have heard royalty department has been know to "accidently" make errors in calculations.

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Kat, sorry about taking your post the wrong way.

I definitely believe royalty owners should be diligent in reviewing their royalty statements and question any prices or deducts that seem out of line.

I wish the "standard" language in lease agreements regarding wellhead prices was clearer and not open to such individual operator interpretation.
No matter the language, the circumstances are always different.
And, admittedly, I did nudge ya a bit . . .
Les - I'm going to respectfully disagree using this as a "factual basis," from Chesapeake's own website, the "About Us" page ...

"What we do
Our goal is simple – generate industry-leading shareholder returns by developing and executing on a distinctive business strategy that is focused exclusively on exploring for and producing unconventional natural gas and oil onshore in the U.S."

Nothing in that goal about generating revenue/royalty for mineral owners.

by law, CHK has a fiduciary duty to its shareholders. The LA mineral code states

§122. Lessee's obligation to act as reasonably prudent operator

A mineral lessee is not under a fiduciary obligation to his lessor, but he is bound to perform the contract in good faith and to develop and operate the property leased as a reasonably prudent operator for the mutual benefit of himself and his lessor. Parties may stipulate what shall constitute reasonably prudent conduct on the part of the lessee.
Thank you, Baron. I'm NOT making a judgement call here as to whether it's right or wrong, fair or cheating. It's simply the way any business operates. Reward the investors who make a commitment, find a supply of raw goods at the least expense. Isn't that why so much of our raw goods, heck even finished product, now come from third world nations?

I cited Chesapeake only as example, but I'm sure I could pull up goal statements from other operators and they would be similar. The companies don't attract investors, and their money, without the "enticement" of an attractive return on their dollars.

IMO, if one wants access to the details, and the feduciary responsibility is to shareholders, then become a shareholder in the company that drills.

Sesport, I definitely understand your point. Yes - a company's first obligation is to maximize value for its stockholders. But that does not support statements that all companies are trying to "cheat" mineral owners. That statement is just too broad in its reach and coverage.
Les - As I stated, I wasn't making a judgement call about the responsibility to disclose. I was simply stating the fact of what the goal is of business. And, yes, the term "cheating" applied to all businesses is broad as well as inflammatory.

IMO, as it is the responsibility of the lessor to execute due diligence in leasing, the responsibility extends to being knowledgeable about and conducting a regular review of records & statements provided.

And never stop wondering or questioning ... in a civil manner, of course. lol


Don't you agree that CHK selling to an affiliate, La Midstream, creates a conflict of interest?

JD, it is unclear if Chesapeake is selling to LD or that LD is simply providing transportation to the gas sales point.

Assuming Chesapeake were selling to LD, if the pricing is done on a transparent basis (ie tied to a gas index price) then the transction could still be acceptable.

Some companies may have marketing affiliates but prices could be a pass-thru from the downstream arms-length gas sales.
You should look at (1) deductions and the reasonableness of the deductions and (2) pricing, especially with respect to an operator's hedges of the gas price. You will be amazed!


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