Uderstanding your royalty statements, empowering landowners against royalty theft or mistakes

We are chugging along towards completion of the well that includes a portion of our property. The last word is completion of the connecting pipeline is in June and it looks like they are well moving to that goal. They have been working 24 hours a day setting up the pad for production and what I assume is the flowback portion of the procedure.

My attention will soon turn towards a very daunting task of verifying my royalty statements against lease terms and fair market pricing.

I have been told and very much believe that the statements will be nearly impossible to read and understand. Fair enough, but, I am not easily daunted by complications from difficult situations. I fully intend to hire an accounting firm specializing in oil and gas royalties to verify everything and then I will hold the producer accountable for any discrepancies.

I am tired of hearing about landowners being abused.

This is a serious matter, folks who have never had money think money solves problems but it doesn't, it creates a whole new set of complications. And so it is with your royalties.

This site could do a tremendous service to its participants if instead of bombarding us with buyers of mineral rights and royalties it would offer solutions to understanding your royalty statements and aiding in the educating of landowners.

This is my new endeavor, soon enough we will begin to receive royalties and I fully intend to stick around, sharing information with others, learning from some and helping others, extracting the falsehoods and emphasizing the truths.

So, does anyone have any useful information for us on how they started down the path of deciphering royalty statements ? My first guess is the statements are overloaded with numbers that don't correspond to other numbers, confusing and complicating matters needlessly.

I appreciate anyone trying to help.

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Permalink Reply by Henk Vanden Hengel on March 30, 2016 at 4:20am

To do a forensic audit, you need a professional auditor to do the work.  With CHK that required going to Oklahoma and going through their books.  The audit does not cost a million bucks.  Let's say it takes an auditor 6 - 9 months of work, that costs about $50k.  When done as a group, it is a cost effective way to assure things are copacetic. 

The real cost is the legal action that may be required to recover moneys. The audit findings would help put a number to the damages for the group and perhaps for a larger class.  CHK is dealing with a lot of that right now as I'm sure you've read.  

Permalink Reply by INVICTUS on March 30, 2016 at 10:59am

I would drop $10k into a group kitty today if I could find 99 others SIMILARLY SITUATED to me who would do the same for the purposes of onsite CHK audit with the following purpose in mind:

 - Verify Volumes of Products coming from respective group's member leaseholdings: Oil/Gas/NGL's;

 - Verify pricing of these products sold and untangle  and correctly document the convoluted scheme with affiliates, including the pipeline co's  whereby the respected leaseholders are not paid mathematically correctly according to their lease terms; (This is the key and why many suits have been/are/and will be filed.)

 - Provide the demand letter, followed by the lawsuit. I have no trouble with sharing the group's audit findings with the press, the Dept. of Justice, the IRS, This forum, etc.

Ultimately, the only thing I ever found CHK or its subs or its pipeline buddies would respond to was a lawyer (or a lawyer in the background while I conducted routing business relating to minor items within my lease. virtually anything else is just idle conversation.

I wonder -  is it possible to get 100 leaseholders together, in a room and cough up $10k each, for their own common good? Project will last maybe one or two years. Because once substantive, verifiable, and traceable facts come forth regarding the royalty scheme, the proper checks will start flowing, but will probably be accompanied by nondisclosure settlement offers.

One thing, the upcoming court decisions regarding "At the well", "Netback", and "interpret within the four corners of the lease document" competing philosophy's regarding royalty obligations need to navigate through the system as their interpretations will be key as to how the proposed audit group would treat its newfound information.

Permalink Reply by Mark Hrutkay on March 30, 2016 at 11:09am

Just for the record...  I understand group dynamics pretty darn well...   Getting people similarly situated in a room and getting them to all cough up checks (especially $10k)...  Probably isn't going to happen.  If you can get one or two more to put up $10k, that will probably be all you are going to get...

NOW on the other side, if you manage to prove something and get everyone some money back rest assured that those who NEVER spent a nickle, will tell the world how relieved they are now that WE proved ....  OR WE DID something and take credit for something they never did.

In short you don't want to be on fire around them because nobody is going to Pi$$$ on you to put it out...


Best of luck...


Mark

Permalink Reply by INVICTUS on March 30, 2016 at 11:52am

Unfortunately, I fully agree with you.

Nevertheless, the offer is there for serious business-like minded people who wish to put this into practice.

There are always free-riders for any thing of value done by others. That's fine, once the dike breaks on what has been happening, their mere support and overwhelming numbers will only lift the fortunes of all leaseholders, including the original lead group that first prosecuted the case. This kind of thing happens every day, it's how we progress in life, business, politics, etc.

For me, as a business investment, the risk/return of this money, properly spent, is overwhelmingly worth it to me. Admittedly, to some, or many, it would not be, nor would it be prudent for them to participate at that level -  however, IS there "A" level at which, to them, it would be prudent? The concept of crowd funding intrigues me, for example.

People get together daily in all venues to support common interests -  why shouldn't leaseholders do the same. Didn't this happen when the land groups formed? Why should they not re-form? Read my prior rants on this issue.

My summation is this: Don't rely on the attorney's to take the lead. Rather, it might be prudent to have them sell their services to an existing group, and then move forward. This is PRECISELY what happened when the landowner groups were formed; at first by non-attorneys, who HIRED the attorneys to negotiate the leases.

Permalink Reply by David Allen Lilly on March 30, 2016 at 12:21pm

How would it work if not everyone was either in the same unit or in the same state ?

The idea of a royalty owners UNION intrigues me. There has to be a way to do this, smarter people than I could figure it out.

I intend to stick around if nothing else just to pass along information and receive information from others.

Eventually you may see royalty owners get wiser and more self assertive in obtaining that which is rightfully yours.

I say again, we should meet sometime, I'd buy you dinner at Bob Evans.

Permalink Reply by bo boboski on March 30, 2016 at 10:40pm

Isnt there already a group that represents royalty owners? NARO. National Association of Royalty Owners. Are they addressing the theft? Is that a bunch of talking heads that like to have meetings to feel like they belong to something?,or are they planning on actually going after the thieves for compensation and convictions of felonies?  If not,then that group isn't worth joining.

Permalink Reply by David Allen Lilly on March 30, 2016 at 10:51pm

Having looked into them on their website I was unable to find any useful information that would help a royalty owner better understand or address any situation he might find questionable.

If I am wrong I would love to know of it.

Permalink Reply by Becky on March 31, 2016 at 2:04am

David, I prior friend requested you and sent you a private message to which you have not responded.  Have you called the National office?  I am certain that they could put you in touch with someone to discuss this with you.

NARO is working on this.  Many of their chapters are actively involved on this issue from mineral owner education to conversations with the legislature. 

Friends and neighbors are beginning to have these discussions.  For example, a few folks from Noble County are getting together this weekend to discuss this very issue.

0ym9x5ag7ury2Permalink Reply by 0ym9x5ag7ury2 on April 2, 2016 at 2:35am

The PA Chapter has convinced the PA Attorney Generals Office to go after Chesapeake, which is why there is a Complaint from the PA Atty Gnls Office vs Chesapeake. Also a filing for the Demchak vs Chesapeake settlement that was a very bad deal for PA landowners.

Across the Nation PA is the only Shale Play State Action that I know of against Chesapeake.

Someone has the Black Book that contains the names of all of the Shale Play State Govs & Atty Gnls that took Chesapeake money.

No wonder, you hear these elected officials saying things like "I would like to help" (but I'm corrupt and don't want you to find out about me). Let's hold a Bible meeting and I'll give you a hug while you suffer the worst theft that has ever hit Ohio.

A funny thing happened on the road to the White House, you took a detour and will end up in the Big House.

Permalink Reply by David Allen Lilly on March 30, 2016 at 11:40am

I would gladly do the $10,000 in your hypothetical.

Permalink Reply by Undecided About Oil on December 18, 2017 at 3:56am

Any news?

Permalink Reply by Laura on December 27, 2017 at 1:19am

Yes I would be interested to know if you have made any head way in deciphering the royalty statements? 

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