Royalty audits?
Hey ... does anyone here know how often and by whom production companies are audited to make sure they are paying the land owner for the amount of oil and gas they are really selling? Does anyone ever get something in a lease that allows for an independent audit? Or, since they and we are suppose to be in somewhat of a partnership, has anyone asked to see the books for their well? And even if they show a ledger, how do you know its true? Just askin...
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Replies to This Discussion
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Permalink Reply by Frank Walker on -
Terms of audit (allowed frequency, location, etc.) and procedures therefor need to be in your lease. If no such thing exists in your lease, you'd better hope another landowner in your unit has such provisions in his. Failing even that, I want to extend to you a heartfelt "good luck".
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Permalink Reply by Jim Litwinowicz on
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Rick; a good lease allows for an annual audit by the landowner when requested. There are companies that will do those audits for the landowner. Don't know what their fees are.
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Permalink Reply by Rick on
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Well Jim, I dont think that many of the leases signed in the 1990's and now held by production have an audit clause in them. I dont know of anyone that has requested an audit for one of the many many vertical wells drilled in th last century. I will study my lease again, but I dont remember seeing that in there.
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Permalink Reply by Jim Litwinowicz on
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Rick; I said a good lease. Precious few leases from the 1990's are good leases.
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Permalink Reply by AJ on
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I believe that if you look into it, I am not 110% positive how it works, the production company does not determine how much has been removed from a well. A third party measuring company and the purchasing company tells the production company what the final numbers were. These procedures are in place to protect from the very problems you are envisioning.
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