Accounting Funny Business on Royalty Statements

Has anyone had any problems with Samson's monthly royalty payments?  There was no natural gas production reported in my January royalty payment and the math didn't add correctly when multiplying the volume times the price.  There were 44 pages of details and the math was incorrect for all the wells.  I called and was told Samson implemented a new accounting system and it wouldn't accept natural gas production and thus zero payments.  i couldn't determine if this is a widespread problem or limited to a "few" mineral owners.  Samson said it would be fixed in the February royalty check.  Plus they've changed the codes.  What was once called oil... is now called condensate.  I did thank them for at least answering the telephone... unlike some other oil/gas companies.  thanks. 

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Permalink Reply by ME on August 4, 2015 at 17:45

Kathy,
  I'd write a letter to BP and have the State Attorney General's Office send it to them (30 day demand letter, certified).  I'd bet you have your answer within two weeks.   

Permalink Reply by Gale on August 5, 2015 at 6:45
I am now thinking all this about changing the computer software was all,part of something bigger. I think they knew they were headed down narrow paths and used this as an excuse to delay and supposedly mess up payments.
Permalink Reply by Krkyoldhag on March 5, 2014 at 4:02

I read awhile back that KKR and Itochu had some kind of disagreement.  (Itochu owns 25% of Samson)

Do you know anything about what Itochu was unhappy about?

I have not gotten a check in months from the well I hold interest in.

Permalink Reply by JHH on March 5, 2014 at 5:16

I have not heard that... but nothing surprises me.  i'll do a little google this afternoon.  i finally got my check.  everything seems OK.  thanks, jhh

Permalink Reply by Krkyoldhag on March 5, 2014 at 9:48

I just read a news release about KKR. Says has raised $2 billion to invest in oil and gas assets  Its in an article at dbanerjee2@bloomberg.net by Christian Baumgaertel a@cbaumgaertel@bloomberg.net. 

nvestors are seeking to take advantage of a boom in U.S. oil and gas supply available through hydraulic fracturing of shale rock, known as fracking. Carlyle Group LP co-founder David Rubenstein last year said energy is the most attractive area for investment, and Blackstone Group LP in 2012 closed its first energy fund with $2.5 billion, which was generating a 55 percent net internal rate of return as of Dec. 31.

What does this mean?  that KKR doesn't have the $$$ to drill themselves?

goes on to say The fund will focus on partnerships, mineral rights, royalties and mezzanine debt with the goal of producing consistent income, rather than on buying entire companies and selling them later for a profit,

Know what this means? In plain language?

Permalink Reply by olddog573 on March 7, 2014 at 6:26

Doesn't sound to me like they are wanting to drill themselves but rather buy royalties and mineral rights.

I had heard they were going to sell out of Haynesville when the market was right.

Permalink Reply by Skip Peel - Mineral Consultant on March 7, 2014 at 7:02

Agree, olddog. Samson Contour, subsidiary of Samson Energy, in the Haynesville Play was noted for leasing lands, forming drilling units and then drilling very few wells.  At one time they had over 100 Haynesville Field Orders and had drilled maybe 6 wells and only a couple were horizontals.  Their business model appeared to be secure leases and units and then try to find another operator to drill so they could participate as a Working Interest.  KKR came through town a couple of years ago looking to buy mineral rights.  They reviewed a number of possible acquisitions and then after some time purchased  Samson Energy.  IMO KKR is looking to flip or farm out the Samson leasehold.  They don't have any operating experience but probably assumed they could by all the expertise they might need. 

Permalink Reply by Krkyoldhag on March 7, 2014 at 12:15

I figured Samson would be flipped when KKR purchased it.  Its what they do.  Thanks for the translation.

Is that what they do with Devon?  Participation or working interests?

So long as that old well on my unit produces anything they hold the lease on the unit.  So its locked in. Wouldn't Chesapeak love to have those high priced leases locked in?

Permalink Reply by Skip Peel - Mineral Consultant on March 7, 2014 at 12:31

I am not referring to KKR flipping Samson.  I am speculating about what KKR will do with the lease acreage Samson holds.  I think they will sell some and farm out development rights on some.  I think they like the Blackstone model.

Permalink Reply by Krkyoldhag on March 7, 2014 at 4:55

Got my Samson check and report this week. 

It sure is fancy.  The packet probably cost more to process and send then the amount of the check.

1kw6x71km1v37Permalink Reply by 1kw6x71km1v37 on March 7, 2014 at 13:50

Farmout is likely what KKR wants to do. Carried interest downhole with some percentage royalty until payout, with a back-in working interest at KKR's election. Frequently done among the industry players when somebody on the out wants in.

Selling off partial WI can be lucrative, as Chesapeake found in the Utica Shale play. They were making so much money on the flip that the  former CEO stated drilling wells really wasn't necessary to success.

Permalink Reply by Gale on March 7, 2014 at 13:59
Interesting talk about farmouts by Samson, I am with Samson because they bought the farmouts from McGoldrick in the cotton valley on on our lease. They went in and drilled 7 wells within less than a yr. but haven't done anything since then and that was in 1993. I wish they would farm us out if they are not going to develop anything new.

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