Replies to This Discussion

Permalink Reply by Les Bamburg on February 13, 2010 at 4:31

LP, does the royalty check stub show the size of your tract in acres? If yes - has that changed? If no - there may have been a correction in the tract size. There may have also been a correction to the total unit size but that should not make a significant difference in your tract percentage.

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Permalink Reply by DJG on February 13, 2010 at 5:13

You may have already done this, but I would also suggest sending a certified written notice to both the Revenue Inquiry and Owner Inquiry DO departs asking an explination as to why the payment decimal has been lowered and that barring an acceptable exlination from your operator that you demand that the original (higher) payment decimal be used for all future royalty calculations and that it also be back-dated so that they will reimburse you for the royalty revenue loss from that last check.

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Permalink Reply by Spring Branch,mineral owner on February 13, 2010 at 9:38

LP, how significant was the change.........from what to what??

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Permalink Reply by LP on February 13, 2010 at 10:56

Hey Guys,
First....thank you so much for helping me.
To answer the questions:
The check stub does not show the tract size in acres. Just decimal size.
The difference (for me) only amounts to about $20 but would be more for those with larger property size. My neighbors on either side of me have the same decrease on the payment.
My Division Orders show my mineral interest decimal size as 0.00054309
The payments for Sept and Oct were calculated on my mineral interest as being .00054309.
The recent check paid on the basis of .00050569
My property size is 1.395 acres. My royalty is 25%. The unit size is 642.160000

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Permalink Reply by Spring Branch,mineral owner on February 13, 2010 at 11:03

It is my opinion that a letter of explanation accompanying a new Division Order should have preceded a change on the actual monthly payment. I like the written certified letter demanding an explanation and payment based an the Division Order in force.

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Permalink Reply by LP on February 13, 2010 at 11:56

I appreciate the advice. I have very guarded trust in our operator since they attempted to short me on my property size in the initial lease negotiations and then again on the division orders.
Apparently this is common practice with them when they can get away with it. However...they need to revise their assumed demographics when it comes to me.

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Permalink Reply by ledlights on February 21, 2010 at 14:48

Isn't the following one possible scenario? If more mineral owners are discovered after division orders and royalty payments begin, wouldn't the previously stated mineral interests have to be adjusted? Then again maybe not, that scenario would only affect LP if the newly discovered interests directly subtracted from his share of his minerals, right? Are unit sizes ever adjusted after division orders?

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Permalink Reply by LP on February 21, 2010 at 15:13

Ledlights,
Your scenario is close. I did receive an answer from the operator and it does make sense. I will copy and paste the answer, leaving the name of the operator blank.

The payment decimal keeps changing due to marketing makeup in the well. When this well had first production, there were some working interest owners that were not shown as marketing their gas with (blank) so they did not receive revenue for their portion of gas. Their portion of gas was being sold by (blank) so (blank), and the owners that burden (blank), were receiving more volume than they should have. (blank), and the owners that burden (blank), were receiving a higher payment decimal (inflated payment decimal) than their title interest.

Now the working interest owners that were not originally marketing with (blank) are marketing their portion of gas with us and have requested “makeup” for the volume they did not initially receive. So when an owner is in makeup they receive a higher payment decimal to pay them more of current volumes to make up for the volume they did not receive and the owners (blank and their burdens) that had been getting an inflated payment decimal now get a paid with a lower payment decimal until all the volume is paid back to the working interest owners.

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Permalink Reply by Bacon on February 22, 2010 at 2:38

So with the first few checks, were you getting more than the original DO specified?

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Permalink Reply by Jeff on February 22, 2010 at 5:01

I am also puzzled by my last check statement. This is the senario, 2 wells drilled on the same pad both selling for the same time period into the same pipeline. Two different prices paid on the gas sold. I know there should be a logical explanation but I just don't know.

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Permalink Reply by The_Baron on February 23, 2010 at 10:59

This makeup senario is quite common with the major gas companies. YOu in a sense were given an interest free loan from the WI who were slow to return paperwork.

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Permalink Reply by Dion Warr, CPL on February 24, 2010 at 4:49

LP:

Completely disagree with operator's statement.

Based upon your cited values, your initial Unit RI figure is correct; this is what you should be paid on. The tract size, your ownership interest in the tract, your royalty (contracted), and the unit size is all that matters. If you are leased to the operator, they should have no problems paying your full interest.

The only common scenario in which this could vary is if the lease has been partially assigned or held by another WI partner which may or may not be marketing their gas separately, and they are responsible for paying their portion of the lease burdens (including their proportionate share of the royalty). Normally, if the operator performs the accounting functions for the well (including taking in revenues from gross sales), the operator pays the royalties (saves a step of paying the WI owners, then having them pay burdens; the operator just pays the royalties due and 'nets' the accrued NRI to the WI partner). Still, this interest does not just 'vanish', the other 0.00003740 needs to be paid to you by that WI owner (it's approximately 6.89% of your RI). Just because WI owners weren't getting paid does not change your RI (and does not change your Unit RI). Find out who this party is (or these parties are) and seek out your interest. If they keep up with the shadow games, you may wish to file a declaration of interest, and demand (in writing) full payment for your back royalties. If someone else in involved, demand full payment from all parties claiming a working interest in your lease.

One thing is for certain. You were not overpaid on your royalty, unless something changed (a unit survey, perhaps?). There is nothing to deduct from your interest. You may just need to track down possible other owners of your lease and hold their feet to the fire.

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