Deductions in my royalty checks are ridiculous. Someone Shed some light.

I have an ORRI in Haynesville well in Desoto Parish and I looked at my most recent check.  The operator is Exco.  I am completely baffled on how much they deduct.  Here are the numbers to 100%.                   Total gas/month was 32,698/MCF.  Gross Revenue: $53,300. 

DEDUCTIONS:  Severance, $5,209.  CMP, $1,844.  Treatment, $4,165. Transportation, $2,284.  Transportation 1(whatever that means), $9,900.  Gathering, $10,823.  Grand total of $34,225 or 64% of revenue.  WTF is going on?  Can someone please explain this?

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Oil & Gas ProPermalink Reply by Nixon Dow on February 4, 2016 at 11:30
I am assuming Chesapeake. They are notoriously low on the beginning price. A good $0.20-30 lower than everyone else. Then on top of of that they have the highest post production fees of any operator (at least from my experiences). Also something else you might want to keep in mind, post production fees aren't affected by per mcf prices. When I am reviewing or projecting well income, I typically assume the post production are going to be around $1 per mcf(not saying that is what they actually are but that is what the operators are getting away with).

So at $2.15 Henry hub spot price I assume the following:
Less. $0.25 field price discount(spread between HH and the price on you check)
Less. $1.00 post production fees
For a Net = $0.90 per mcf

So at $4.15 Henry hub spot price I assume the following:
Less. $0.25 field price discount
Less. $1.00 post production fees
For a Net = $2.90 per mcf.



FYI if it is Chesapeake I put that discount closer to $0.50-0.60.
Also my statements about Chesapeake's is not me trying to begrudge them, I am saying this because it is FACT. While there may be other operators doing the same as them, the evidence I have reviewed and confirmed show them being the only habitual offender.

At

Oil & Gas ProPermalink Reply by CG on February 4, 2016 at 11:34

There is no need to assume Chesapeake. Jay Jay already told you the operator is Exco.


Oil & Gas ProPermalink Reply by Nixon Dow on February 4, 2016 at 12:22
Wow, if only I could read. I should have known better, if it was Chesapeake he would have gotten a bill (now that may be a little begrudging).
Permalink Reply by Jay Jay on February 4, 2016 at 12:49
Chesapeake and Exco

landownerPermalink Reply by w.r. frank on February 4, 2016 at 17:21

Can't be both. Exco swapped out of its units with CHK several years ago. Could have started with CHK and now be with Exco as operator.

Permalink Reply by TL DS1 on February 5, 2016 at 11:16

Exco started shorting my checks last year by .20 to .30 per mcf.


landownerPermalink Reply by w.r. frank on February 4, 2016 at 17:33

If I knew what month and btu content, I could react to your post. Also, I don't have any leases with Exco so I don't know what CMP is? The obvious problem is if Exco is legally entitled to deduct post production expenses, they are based on mcf or MMBtu so as the price/mcf or MMBtu goes down, the deducts are a greater percentage of revenue. $6/mcf would cure a lot of ills, but it won't be for a long, long time--if ever. 

Permalink Reply by Jay Jay on February 4, 2016 at 18:47
11/15

landownerPermalink Reply by Bob Zimmerman on February 5, 2016 at 7:13

It would be interesting indeed to see what the operator is charging itself for the same services.


Oil & Gas ProPermalink Reply by Nixon Dow on February 5, 2016 at 7:55

CMP is compression, while new wells have enough gas flow pressure to get into the sales  line without help after a while the flow pressure decreases to a point that they have to  use a compressor to get into he sales line.

Permalink Reply by wpt9452 on February 5, 2016 at 8:57

I have almost the same from XTO and the worst part is they want me to claim over $300 in royalites when I actually only received $128.  They called me and explained it was just like a paycheck with deductions.  I disagree because deductions are something I can claim, I can't claim money I never received.  I am at the point, they can keep the gas.


landownerPermalink Reply by JHH on February 5, 2016 at 16:09

Sabine Energy in East Texas is about the same.  They took over old NFR wells... which were once Chesapeake.

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