Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on September 20, 2017 at 6:17

The price of gasoline has little to do with the economics of drilling Haynesville Shale wells.  In fact the greater the level of drilling in oily basins, the greater the supply and the lower price of natural gas.  Keep in mind that many oil wells also produce natural gas which is treated as a by product.  It effectively puts downward pressure on the price of natural gas.

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Permalink Reply by Seeing Wells! on September 20, 2017 at 7:18

Thank you, Skip.  I understand. Was just venting and filling up my truck......

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Permalink Reply by Skip Peel - Mineral Consultant on September 20, 2017 at 7:29

You're welcome, Seeing Wells.  Two things that you should never do together!  LOL!  On a serious note, those who got used to companies drilling one well in a unit and then moving on to another will be disappointed although the rate of new wells is actually good.  Before if there were 60 wells, there was one in 60 units/sections.  Now if there are 60 wells they may be in 20 units.  So for those with multiple new wells in their unit, the good times are back.  For those without, be patient as long as the price of natural gas doesn't take a nose dive most of them should get more wells eventually.

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Permalink Reply by Real Simple on September 20, 2017 at 8:50

Frustration simply stated…the lack of willingness on the operator’s part (Memorial and now Range Resources) to offer transparency in their well production (or unit production) and the sale of minerals as it pertains to a land owner’s royalty disbursements.

1^st Production: a)Reports are filed with the state; at some point, and can be viewed on Sonris, but it does not correlate with the “cut off” dates of the royalty statements leaving the mineral owner no means of verifying the accuracy of the statement as it pertains to what was filed with the state. B)There are no records with the state website as to dry gas vs. natural gas liquids produced in a given unit. This is important information due to the point that liquids are far more profitable as it pertains to volume of production as is dry natural gas.

2^nd The sale of minerals: Considering we are contracted (Range and mineral owners) with an operator for the production and sale of minerals (in my case expense free). The operator should voluntarily provide proof of sale volume at what given sale amount of the various forms of minerals i.e. oil, natural gas and natural gas liquids.

If any of this information is indeed available, I would appreciate anyone’s enlightenment!!

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Permalink Reply by Skip Peel - Mineral Consultant on September 20, 2017 at 9:02

Real Simple, royalty statements are based on monthly production.  The production reported on SONRIS is also for one month's production.  SONRIS lists production months by the first day of the month so 2/1/17 is for the production reported to the state for the entire month of February, 2017.  The state reporting for NGLs is antiquated and an ever growing problem. As to your other questions or complaints, they are best addressed by experienced O&G attorneys especially those that are already dealing with the same issues for clients who are lessors in Range operated units.

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Permalink Reply by full name on September 21, 2017 at 12:40

Here are my top three:

1.  No transparency in pricing or deductions.  Wells co-owned by two different companies (Vine &GEP) have different prices and deductions.  I have even seen different BTU content from the same well for the same month.

2.  Radically different pricing for gas from two adjoining sections (different companies).

3.  Companies are paying later.  When we started, every company paid between the 20th and 25th.  Now some pay on the 26th, 27th or later.  Indigo pays on the last day of the month and sometime does not post production until after the 1st.  Makes it extremely difficult for some of us to close the books and pay out by the end of the month.

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Permalink Reply by Rick Jackson on September 22, 2017 at 7:12

My issues is with the Royalty deductions. I haven't received any payments because bhp billiton says that I was overpaid on previous payments dated as far back as 2014. I have three different wells that are producing with different operators, and when I contact the operators, they inform me that they have know records of my ownership. In addition, I'm receiving mail about additional wells that are being drilled on my property, as well as calls from individuals interested in purchasing my mineral rights and I haven't received any royalty payment since April. It just doesn't add  up and its no one to talk with to get informed information. I can email you a document and you may be able to tell me what you think.

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Permalink Reply by Skip Peel - Mineral Consultant on September 22, 2017 at 7:30

Rick, the notice letters that come in the mail are a requirement of the state.  When a drilling unit is formed or an operator wishes to drill alternate unit wells (additional wells in the unit) they are required to send notice letters to all mineral and surface owners in that unit and to those in adjoining sections to a distance of 1000' who are identifiable through the public record of your parish.  Receiving a notice letter is not proof that you own minerals.  The individuals making offers to buy your minerals don't know if you own minerals but they hope so.  They perform no title research to establish your ownership interest unless and until you agree to sell.  Their letters are a fishing expedition.  Did those three operators pay you in the past?

You can talk to an experienced O&G attorney or landman or you can post more detail here but free advise is often worth what you pay for it.

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Permalink Reply by Rick Jackson on September 25, 2017 at 2:44

The three operators have paid me in the past and I have copies of the lease agreements, but no one seem to be willing to give any information. The operators are telling me they don't have any information about the wells that I have a interest in, or any payment information. BHP is telling me they only pay what they receive from the operators and I haven't received any payments because I was overpaid, but no one can give me any detail information about the deductions. Basically, BHP is telling me that I did receive payment but after the deductions, the amount was less than $100.00 so no payment was made. For example, I could receive a payment for $800. and have $750.00 in deductions. At the same the operators are saying they have no records of any payments being made.

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Permalink Reply by Skip Peel - Mineral Consultant on September 25, 2017 at 3:31

Rick, do you have the email address for the specific individual in charge of the pay decks for your wells?  If you have prior royalty statements, you have an owner number.  Use it to find the right person with whom to communicate.  Emails will provide evidence of your inquiries should you need to take a further step like speaking with an attorney.  Once you have found that right person, send them a copy of your lease and a past royalty statement with a direct, unambiguous question as to why you are not receiving payments.  Don't go into a long list of questions, remember you are dealing with an accountant that can not and will not answer legal questions. 

There are a lot of mineral lessors who are having similar problems that are connected to new unit surveys caused by Cross Unit Lateral wells.  Too many early operators got in too big a hurry and did a less than accurate job on surveys.  I've been in correspondence with the LA State Office of Conservation on this issue for the last 2 months.  The original Division Order title work for the Haynesville Shale Units may, in some instances, have been based on incorrect surveys.  Let's say you have interest in a tract that has been handed down through generations with each conveyance using the same legal description of the land.  Maybe that original legal description goes back the the 1920's or 1930's.  A new survey, done properly, might reveal that the tract that everyone has known at 36 acres is actually 32.8 acres.  It happens quite often.  So the owners of the tract have been paid for 3.2 acres more than they own and those payments have gone on for a number of years.  The new survey also finds that a neighboring tract was shorted those 3.2 acres, or some fraction of that amount, and now the operator owes those owners for the same number of years of back royalty.  The operator then debits your royalty going forward in order to make your royalty correct and to catch up on the back royalty for the adjacent tract.

There is no guarantee that this is the case in your particular situation however new unit and tract surveys caused by the transition to Cross Unit Lateral wells appear to be revealing inaccuracies in original Division Orders across a lot of Haynesville drilling and production units.  Unit operators do not wish to get into too much detail when this happens as they want to work out those original inaccuracies in their own way and in their own time.  The bottom line of this issue is that state regulations require unit operators to perform surveys to a set standard when they form a unit or, if there is no current production, within 90 days of establishing production and provide that survey to the state.  Obviously most of the Haynesville Shale units have been in production for a good many years past 90 days yet only a small fraction of the unit surveys have been provided to the state and therefor they are not in the state O&G database where the public would have access to them.

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Permalink Reply by Rick Jackson on September 26, 2017 at 7:37

Thank you so very much for the information. I do have my owner number and all of the emails were sent to a general email account. At least now I have some idea of what possibly could be going on. What you described sounds exactly what I have been dealing with. At least I know what questions to ask. Thank you so much for your help and advice. You have been a great help.

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Permalink Reply by Skip Peel - Mineral Consultant on September 26, 2017 at 7:59

You're welcome, Rick.  I'd like to hear if you receive some explanation for withholding your royalty.  If you are right that the new surveys may be the cause then the operators of your wells should say so and make available copies of new unit surveys in the public record where any interested lessor can review them and dispute the accuracy if they feel a mistake has been made.  It is law inscribed in the Louisiana Mineral Code that unit operators file their unit surveys with the state.  For the most part, that is not happening and we should know why.

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