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 David Allen Lilly on March 25, 2016 at 12:21am

When the time comes I would like to meet with you in person and go over all the information you would be kind enough to share.

Permalink Reply by Jefferson on March 24, 2016 at 1:49pm
Ron, are they taking all these deductions from an Alov lease?
Permalink Reply by David Allen Lilly on March 25, 2016 at 12:31am

I am a fighter and always have been. I detest bullies, liars and thieves. My wife terms me "insufferable" when I latch onto some matter or issue, but that isn't always a bad thing.

I have spent my adult life learning to understand things complicated, residential and commercial construction to the level of job superintendent, responsible for everything.

Lately I learned to perform maintenance on high end espresso and latte machines, the service technicians manuals are and inch and a half thick, complicated with a mass of wiring, all manner of electrical components, plumbing, refrigeration and computer components. I covered a service area of 1/7th of the country, and did it well.

I crave challenges and I will learn to read these statements as well, one word, one line, one page at a time.

Plus, I no longer work, so time is available to me, my new job will be managing our royalty income, verifying terms are adhered to and such.

I know this is hard but when we go into production I will be ready. I have been given horror stories on end, assured that I will pay for pipelines and such, that my lease couldn't be very strong etc. etc.

None of it fazes me, Let us stick together and figure this out.

I found this site this morning:

http://www.mineralweb.com/owners-guide/leased-and-producing/oil-and...

This particular site could expand its readership tenfold were it to use its reach to help folks with their royalties.

Soon we will be looking for a great accountant specializing in oil and gas royalties and will be looking for your advice.

Have a good day, keep this all in perspective. Don't let them ruin your day or your life.

Permalink Reply by Eleanor V Casler on April 5, 2016 at 3:56am

Hi David, 

Thanks for the link great site!

Permalink Reply by William Dotson on March 25, 2016 at 5:25am

I start with the total well production in Mcf & Bbl. Then I apply my Unit decimal interest. This tells me weather there numbers are close. If the well produces wet gas, you will have to track Mcf removed, processing costs and what the liquefied gas sold for. Then apply the unit interest to that number. All these numbers should very closely match what you actually get paid.

Be sure to keep track of any and all costs the O&G company pays on your behalf. This will include any processing and transportation costs. All of these costs are your deductions for income tax.

Permalink Reply by William Dotson on March 25, 2016 at 5:47am

Also, I am in negotiations on a new lease. I am standing solid that the lease be non-transferable. The O&G company is raising cane. In my last communication with them, I told them to either accept it, find an alternative that would guarantee the lease never went to a company I didn't approve, or close the matter and leave me alone.

Permalink Reply by Fred Brown on March 25, 2016 at 8:16am

We just finished an audit this past year performed by a CPA that specializes in O&G leases.  He had to go to the company headquarters to find all the information he needed.  The end result was he found the gas company was paying royalties to the wrong people, which turned out to be the easiest part of the audit.  The biggest problem was the difference between well head production and the sale of the gas.  There was a 7.5% difference between the two numbers.  Not bad considering the lease specifically forbids any deducts from the well head production.  That fact does not seem to bother the gas company.  We think is at a minimum fraud and even theft.  With fraud, you can get legal fees reimbursed.  Right now the biggest problem is being able to afford legal consul to fight  the gas companies and their legal departments.  The little guy has a big disadvantage and the companies know it and are willfully utilizing the advantage.

Permalink Reply by William Dotson on March 25, 2016 at 8:54am

It costs very little to sue anyone. Bring the suit. Present what you have to the Judge and let them decide. You do not need an attorney. Let the O&G company spend money on huge legal fees. The Judge can interpret the facts and as long as you have that, you have all you need. 

Permalink Reply by INVICTUS on March 25, 2016 at 9:05am

Very bad advice. Gotta call you on that one and not let that go unchallenged.

Unless one is well versed in oil and gas law, its nuances and subtleties, and licensed to practice law (with experience to boot), ordinary leaseholders have no business in challenging these people in court solo.

I promise they will eat you alive.

Get competent legal help.

Permalink Reply by William Dotson on March 25, 2016 at 9:28am

If convicts can write appeals to the Supreme Court and win, I think we probably can do the same. Just because you have Esq after your name doesn't make you God. Right is right. And I'd rather lose a low cost (to me) suit than let Assholes steal from me and do nothing.

Permalink Reply by Mark Hrutkay on March 25, 2016 at 10:35am

Just as a note... Convicts and law students appealing cases and winning is more the stuff of legend and made for TV movies... Its rare it happens in the real world.  It usually only happens when a sympathetic judge happens to see some clear error and wants to be an advocate for the underdog....  RARE RARE RARE.... 

Permalink Reply by Booger on March 30, 2016 at 9:31am

"than let assholes steal from me and do nothing"............you just insulted me and every other asshole that ever lived

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