How do you lose 3000 Barrels of Oil?
Frequently on revenue checks you will see a negative production volume for a prior month followed by a positive production volume for the same amount/same time period. It looks like this on a "lease" side of the CHK stub:
1213 1 95.00 2 02 -9000.10 ......
1213 1 95.00 2 02 9000.10 ......
114 1 92.03 2 02 8502.90 ......
In this example of a January check stub, the production for December was apparently subject to an "internal audit" with no changes. The December production balances out and there is no effect on the royalty owners bottom line. The royalty owner is paid their percentage of the 8502.90 barrels of oil produced in January.
However, at times there is "internal auditing" or adjustment that makes a HUGE difference in the royalty owners bottom line. To date, no one has been able to explain these adjustments. They would look like this:
1213 1 95.00 2 02 -9000.10 ......
1213 1 95.00 2 02 6000.00 ......
114 1 92.03 2 02 8502.90 ......
In this example 3000.10 Barrels of oil has just been "un-produced" leaving the royalty owner with a reduction in the current month's check. So instead of getting paid their share of the 8502.90 barrels of oil, they get paid their share of the 8502.90 minus their share of the 3000.10 barrels of missing oil. Last month's check could have been $40000, but this month's may only be $2000 - not because of a decline in production, but because CHK took back $38,000 in previously paid royalties.
Production numbers filed with the state are adjusted as well. For example, production reported for the month of June 2013 for a certain well might have been 7000 Barrels. Six months or a year later, looking back at production numbers for June 2013, they might show that only 4500 Barrels were produced from that well. It seems that CHK has found a way to report high levels of production to the state, pay royalty owners large sums of money for the products produced, and then "adjust" the production amounts months down the road and take the money back from the royalty owners. How can this happen? How can a company consistently mis-report production numbers? How can anyone know whether the well produced 9000 barrels as originally reported or 6000 barrels as later adjusted?
Another issue with this is that the royalty owner pays a hefty income tax bill on the mineral production from the previous year. CHK sends out a 1099 reporting that it paid royalty owner John Doe X amount of dollars in 2013. Now, in the middle of 2014, CHK is taking back a very large chunk of money that Mr. Doe already paid taxes on. Mr. Doe would likely have been in a lower tax bracket if the amounts had been properly reported.
Has anyone hired an auditor to verify that CHK is paying royalty owners the proper amounts? How much did it cost and who did this for you? Were errors discovered? Has CHK offered any explanation as to why they consistently miscalculate the amount of oil they actually produce? You would think that the oil would be metered at the wellhead, reported, and then royalties paid appropriately. How do you find out 6 or 10 months later that you didn't produce as much as you thought you did? (This happens with NGL and NG also.)
Thank you for your comments!
Views: 2982
Replies to This Discussion
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Permalink Reply by Dexter Green on -
Royalty adjustments from month to month are so common that it makes you wonder where they get these people who are cutting the checks.
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Permalink Reply by 0ym9x5ag7ury2 on
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Dexter,
Do some research on your producer. If you don't like what you find out, then I would recommend knowing everything about your Royalty Statement.
You're going to have a headache in the morning after for sure.
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Permalink Reply by Dexter Green on
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My situation is far more...complicated. I'll leave it at that.
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Cheryl,
I don't need to read your post due to the fact that Buck Well 1H is under heavy theft by the producer, which is probably the new norm for landowners.
What is going on is, the producer is taking huge amounts of Natural Gas Liquids and not paying for them. Add up the NGL (Product Code 4) and you'll find something like this: We were paid $16,000 for NGLs then charged $24,000 to have the NGLs processed, for a net charge of $8,000. The producer then took that $8,000 out of our oil and gas royalties so we lost money.
We gave our producer $8,000 to steal close to $100,000 worth of NGLs.
Here is how you crack the case:
Every 1 MCF of Natural Gas on your statement = 2 gallons of NGLs.
Do the math and you'll find that you were fleeced out of that volume of NGLs. Multiply the number of gallons by the amount your producer paid you (best price is probably under Market Value) and you'll know how much money was stolen. Remember, you paid the producer to take that amount of NGLs.
If you have an ALOV lease, most everything on your royalty Statement is in violation of your lease. We aren't supposed to pay processing fees, or severance taxes (which are also bogus since Ohio doesn't have a Severance Tax on NGLs.
We are supposed to be paid for all NGLs which are liquid hydrocarbons on our lease. The producer also can't sell to an Affiliate or use our oil & gas free like the statement implies, and so much more.
The Ohio Attorney General has my complaint of Theft By Deception, it may be time you followed suit. Like those Anonymous sites, old Mr. Magoo could banned from social media for the telling the TRUTH!!!
email me at: mrrxtech_yah@yahoo.com Go to the Ohio Attorney Generals Website and use their complaint form. I have format that will make your complaint simple and to the point.
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Permalink Reply by Dexter Green on
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"The Ohio Attorney General has my complaint of Theft By Deception"
Ron, if what you're saying is true then it isn't theft by deception, it's just straight up theft. No deception. They're stealing from you, plain and simple. Hopefully DeWine will take action before it becomes as bad as it is in PA.
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Permalink Reply by Joseph-Ohio on -
Personnally concerned that it all starts a long time before wells go into production.
Like prior to even entering a lease agreement.
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Joseph,
You may be correct. However, assembling the evidence to prove your suspicions will take a great deal of time and assistance from multiple sources.
Catching a small fish like a Landman that did something he wasn't supposed to and getting him to roll on the people higher up the food chain would also help.
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Permalink Reply by Zack Jameson on
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I've had royalty adjustments on almost all of my royalty checks. It's odd that the adjustments always take away from the landowners and the adjustment never benefits them.
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Permalink Reply by Joseph-Ohio on
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Good morning Mr. Zack.
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Ron/Cheryl,
If both of you have an ALOV Lease you should get together and consider splitting the cost of having a forensic audit done on the CHK books in relation to your wells. The ALOV Lease says that if what CHK has shorted you is 125% or more than the cost of the audit then CHK has to foot the bill. Given what they have already shorted Ron you should be able to meet that threshold.
The auditor may want some upfront money to initiate the audit.
The audit clause in the lease was written with the intent that landowners would band together in hiring an auditor to review CHK's books.
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Ron's situation is totally different than mine. I do have a SURE lease that allows for audits, but I need to know who is qualified and experienced with these types of audits, what it costs and what kind of results they typically get.
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Alan,
Thanks for the advice.
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