landowner

(UPDATED) Royalty Payment Price Different for Checks from Encana/Shell

Why would the sale price for gas from Encana & Shell differ? It is the same gas from the same well. But these 2 companies that share the stake in the well are giving me royalty payments at different prices.

Tags: Encana, Payments, Royalty

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Permalink Reply by jr on January 14, 2010 at 15:10
jennifer,
some of the companies are charging a transportation cost in producing the gas. look at your lease and see if you are to get payed at the well head or if you are responsible in the transportation charges. encana has temporarily shut down a pipeline extension in red river parish because some of the land owners refuse to allow pipeline right of way unless encana stops holding out transportation charges. near the catfish bend road area.

Oil & Gas ProPermalink Reply by Les Bamburg on January 14, 2010 at 18:52
Jennifer, as Harold stated each company must negotiate its gas sales price each month independent of the other so prices could be different.

landownerPermalink Reply by Spring Branch,mineral owner on January 14, 2010 at 20:29
It would seem to me that only the operator of the unit would be responsible for the sale price of the gas and NOT a non-operating Working Interest owner. Partners or not, it seems that only one of them would be Operator. Jennifer said it was the same gas from the SAME well!

Oil & Gas ProPermalink Reply by Les Bamburg on January 15, 2010 at 19:12
SB, actually each working interest owner is responsible for the sale of their share of produced gas. Also, the lessee is responsible for making the royalty payments to their lessor based on the gas price received by the lessee. In many cases a non-operator will allow the operator to sale their share of the gas production. It is also common for the operator to make royalty payments on behalf of the non-operators under the terms of the unit operating agreement.

In the case of EnCana & Shell, information indicates the parties cross-assigned the lease agreements such that they each hold 50% of the agreement. If this is the case, each company may be independently marketing their share of gas production and making separate payments to the lessor.

landownerPermalink Reply by Spring Branch,mineral owner on January 16, 2010 at 8:30
Do they jointly own the gathering lines 50/50? It would sure seem that this methodology would lack efficiency. I have to believe that the Shell/Encana arrangement is the exception rather than than the rule, Les.

Oil & Gas ProPermalink Reply by Les Bamburg on January 16, 2010 at 8:57
SB, I believe the gathering lines and trunklines downstream of the production separators will be owned by a 3rd party (as well as treating and any compression) who will charge a fee to the unit owners. The cross assignment of lease agreements is the exception but I believe the same situation applies to Chesapeake/Plains and Exco/BG. Most units likely have non-operating owners and the decision to market their share of gas production likely depends on many factors. Many middle and large size producers will typically elect to market their own gas as it can be "pooled" with gas from their operated units and/or they may have agreements with 3rd party marketers that commit such volumes.

landownerPermalink Reply by Spring Branch,mineral owner on January 16, 2010 at 14:41
In the case of Plains and BG, there won't be any operated units in the Haynesville. I am receiving Haynesville royalty checks from both Chesapeake and Exco..........nothing from Plains or BG. Don't currently have any production in any Swepi/Encana units, but will have eventually. I'll be curious to see how that goes.

landownerPermalink Reply by Henry on September 25, 2011 at 8:30

SB,

Some people who respond to my survey receive checks from both SWEPI and ECA for the same well.  Some receive checks from both CHK and PXP for the same well.  Others don't.  I do not know why this is the case for some lessors and not others.


landownerPermalink Reply by Bacon on January 15, 2010 at 2:18
In our situation, Encana is charging transportation (10%) even though the lease seems to forbid it. They are not charging severance. The half that Shell pays, transportation is not deducted but they are deducting severance.

landownerPermalink Reply by Bacon on January 15, 2010 at 4:41
You speak the truth Grasshopper

landownerPermalink Reply by Spring Branch,mineral owner on January 15, 2010 at 6:44
Also the price received is the price received. The "PRICE" should not be affected by transportation, compression, or anything else. Volume times Price equals Revenue, both gross and net. It should be revenue that transportation, compression, etc. is deducted from (if the lease agreement allows it) rather than product price, IMHO!

landownerPermalink Reply by Bacon on January 15, 2010 at 6:49
Yes, that's a great point. Questar was deducting severance on the first couple checks then stopped. I'm sure collecting what was withheld will go very smoothly.

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