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 1:04pm

$100,000 to sue for royalty theft ???

C'mon, I sense a scare tactic. Fellas, don't be shaken out of your boots.

Permalink Reply by Mark Hrutkay on March 25, 2016 at 1:20pm

Suggestion... Hire a lawyer, sue them, post the bills here and take it all the way to a jury verdict... No settlements ... see how things turn out.... Let me know us all know what it costs. Then when its over let us know how it feels. 

Permalink Reply by David Allen Lilly on March 25, 2016 at 11:50pm

What I will do is up to me, and what I do depends on what is done to me. But I will not be scared into submission. My purpose with this thread is to open a dialogue concerning how we get what is ours I the first place.

We need to share information with each other, it may well be that we can get restitution before doing a $1,000,000 audit or bringing a $100,000 lawsuit.

Anything is better than lying down to be molested, assuming that there will be molestation, which leads me to my next point.

I have been doing this internet chat thing a long time, I know that there are people misrepresenting thing everywhere I go.

I want to set the record straight and I hope to gladly report that I have been treated fairly.

We do need to better stick together, and share information. I do suspect that a large part of the horror stories reported here are the direct result of bad leases that allow landowners to be abused, I don't celebrate it but I suspect that it plays a role.

I also suspect that INVCITUS is correct that most folks will treat this as "found money" and they don't want to do the hard work of  dealing with the problems that arise.

Remember, money does not solve problems, it creates a whole new set of problems.

I really want to hear from people who stuck with the process of realizing royalty shortages and saw the process trough to their satisfaction.

Just don't be afraid, and don't lay down for them.

Permalink Reply by INVICTUS on March 25, 2016 at 1:54pm

As a pad owner, with royalties well into seven figures, I tell you now:

I've been approached by three decent firms with reasonably good landowner representation to become lead plaintiff for royalty issues:

I've approached two more who agreed to take me as lead plaintiff:

I rejected them all for a variety of reasons I may share later on this site, should I care to do so.

And I'll say it again: $500k to 1MM for a solid forensic audit.

The same additional amount for decent legal representation (Not contingency) to get my O/G company to cooperate and loosen up the files for a true onsite audit.

                                OR

The agreement for representation you'll sign for contingency, which is quite..................

I'll save that for later.

I'm no lawyer. And none of this is bull****.  It's real if you want to play ball with real assh***s who dress better than most of us, can turn really, really nasty on you at a meeting in a minute, and will depose you if it gets really hot, wanting to know about every asset you own so they can plant that in your mind as you try to not piss your pants on the stand or in a deposition. This is business for adults, not fantasy play time like beating up Biff Tannan in back to the future.

.

William, I bleed for ya....you're ok and my sympathies are with you, and , yes, you most certainly have been cheated.

But until all you "William's" learn to put aside your "I can do this alone", or "I don't like my neighbor", you will all be feast for the gods of oil and gas production

REFORM YOUR SIGNING BONUS GROUPS AND GET THE MEETINGS GOING AGAIN!!!

FARM BUREAU: GET OFf YOUR "EDUCATION SEMINARS" DUFF AND TAKE A PROACTIVE ACTIVIST STAND FOR THE MOST IMPORTANT CROP TO RURAL AMERICA IN A HUNDRED YEARS: OIL AND GAS PRODUCTION!!!

Like you, William, virtually none of my neighbors trust me, a pad owner...suit yourself.

They won't listen, won't take help, won't work with me or one another for common interests, they're provincial, jealous, suspicious, some superstitious for goodness sake, and they create their own hell by their attitude of fear or don't give a damnitis disease.

This is a main reason why larger landowners don't open up on this forum. Of course the gasco's read this and report back, monitoring all of this constant bitching....but where are the great groups that formed? why are you not holding monthly meetings?

Because many think it's "found money"...They won't treat it like a business and hold their partners, the Oil and Gas companies accountable.

I really don't think I want to hear any more about taking anyone like this to court without proper counsel.

And I don't want that argument to influence good people who will surely be creamed and embarrassed by trying to do so. THAT'S wrong.

Permalink Reply by G.H. on March 25, 2016 at 7:51pm

Interesting.  You make a lot of good points.  Very hard, and generally prohibitively costly, to take any of this on on your own... even if you have a very large amount of acreage producing.

Permalink Reply by David Allen Lilly on March 25, 2016 at 11:52pm

You are exactly right, it is not found money, treat it like a business. I fear too many people THINK they are shorted but never go down the road of reimbursement.

Permalink Reply by Henk Vanden Hengel on March 29, 2016 at 3:57am

The royalty statements are very difficult to understand and that's not an accident. Depending on the gas company, the payment decimals on the royalty statements are often derived from information that is not made public. 

I analyze royalties as part of my job at a law firm and I can tell you that we've recovered significant money for dozens of clients without going to court. If your royalties are substantial or were so previously before gas prices plummeted, I highly suggest getting them analyzed/verified.  Mistakes are common and from experience I can tell you the mistakes tend to be in favor of the gas companies.  

Find a law office who does this and knows what they're doing. The cost is worth it and if that's a concern then ask them to do it on contingency.  Then nothing is owed unless money is recovered.  

This is not a plug but an honest message to get your royalties checked. There is a statute of limitations on mistakes if they are made.  Treat the royalty income the same as your job's salary/wage. You have earned this money.  

Permalink Reply by David Allen Lilly on March 30, 2016 at 12:47am

Can you tell us the benefits to hiring a law firm to analyze royalty statements over hiring an accounting firm to do the same ?

I wonder how recalcitrant the oil companies are in correcting shortages, I know they would not be eager but how much effort is required to get them to correct their errors in the form of an actual check ?

I need to and will send you a friend request, I would like to inquire further as a prospective client.

Permalink Reply by Mark Hrutkay on March 30, 2016 at 2:23am

Thoughts here.... Its not so much accountant vs. attorney as it is WHO HAS MORE EXPERIENCE DOING IT?  (at least in the initial stages)

Bear in mind that an ACCT can represent you in tax court against the IRS just like an ATTY can.... In that respect they are interchangeable....

Chances are the ACCT hourly rates are lower (probably not much lower) than the ATTY rates.

Should an ACCT find something wrong, then you probably need an ATTY to follow through with.   Then the ACCT becomes the expert who testifies about the issue he found.

On the other hand if you start with an ATTY and he finds something.. The ATTY has to have the records reviewed by an ACCT to have him be the expert and explain what is going on (assuming the ACCT finds the same problem)....   Keep in mind an ATTY can not be BOTH an advocate and a witness..... (he cant represent you and testify at the same time)...

So pick the one you are most comfortable with who you think has the experience to do the job.   However be prepared to pay BOTH (ATTY and ACCT) if they find something.  

BTW:  It does sound like Henk knows what he is talking about, although I've never met him and know little more about him than what is in his post... I googled him and he does work for a law firm in PA, south of Binghamton NY, which has had a lot of NG activity.. I actually have considered talking to him myself....


Best wishes....


Mark

Permalink Reply by Henk Vanden Hengel on March 30, 2016 at 3:49am

If you know of an accountant that can verify gas royalties and wants to do the work, by all means hire him/her. This is certainly a numbers game but to do the work effectively requires a different knowledge base than doing taxes. Put another way, I have done royalty verifications for accountants.  

I was an analyst for a number of years in a different industry and it took me significant time to learn this one.  The benefit of hiring a law firm is the threat of action.  Keep in mind that most leases, at least in my area, have an arbitration clause meaning that if there is a conflict it must be dealt with through arbitration and not in court.  

If I find problems on incorrect payments of royalties I put my information together in a way that leaves nothing to chance. All communication is done through email and the contact list I've built allows me to go to the person who can correct the issue. I can't tell you how important that is because many of our clients who have tried to get answers through owner relation lines often get the run-around until they give up.

Most of the time the problems I uncover are resolved without issue and I can tell you that had I done all of the work on contingency I would have made a lot more money. If you've collected royalties you've undoubtedly seen many, many revisions of payments from wells on your statements.  This is just another revision they make to correct what needs correcting. 

I have been privy to the process and findings of a forensic audit on CHK.  It uncovered a number of things but legal action will likely be required to recover damages and that hasn't happened yet.  

Permalink Reply by David Allen Lilly on March 30, 2016 at 4:06am

This is my decision to make, which way is better ? I desire some way to keep things straight with my royalties, am I getting what I am supposed to be getting and how do I address a discrepancy to my satisfaction ?

Obviously I am looking for the most direct and economical route to that end.

It seems your opinion is to hire a law firm to address these issues instead of an accounting firm. I had thought that an accounting firm could show me a discrepancy  and they could take it to the producer or I could.

I wonder how recalcitrant a producer would be in ponying up any shortage ?

Permalink Reply by INVICTUS on March 30, 2016 at 3:03am

Curious as to your thoughts or experiences on a forensic audit, specifically Chesapeake and/ or their affiliates?

Have you performed and successfully concluded one of those, resulting in additional compensation for clients?

Onsite (Oklahoma) or via one of their divisional headquarters?

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