General royalty revenue questions

Q:  What are royalties?

A:  Royalties are the mineral owner's proportionate share of production in an oil and gas lease.

Q:  When are royalty checks issued?

A:  Revenue checks are issued at the end of each month if your revenue reaches $100 minimum, or depending on state regulations.

Q:  Will the royalty check vary?

A:  Yes. Many factors contribute to your payment, such as market conditions, fluctuating commodity prices, regulatory or contractual changes and production volumes.

Q:  Why am I not getting paid for the current month of production?

A:  Natural gas and oil revenues are generally paid one to three months after the actual production date, in accordance with state regulations and lease terms.

Q:  Can the revenue paid to me be adjusted after the check has been issued?

A:  Yes. Royalty accounts are subject to adjustment, either upward or downward. Adjustments on your check detail can be identified by a positive and negative entry listed under the "Your Net" column on your revenue check. The negative entry will indicate what was previously paid to you on a prior royalty check. The positive entry right above it will indicate the amount that should have been paid to you. The difference is the adjustment to you for that specific production month. There are many factors that may result in a prior period adjustment, such as:

• Revised production statements from the property operator
• Revised plant statements from a plant operator
• Corrected data received after an unexpected operational change (often due to a mechanical failure that interrupts normal operations or a major weather event)
• Revised pricing information from third parties
• Revised allocation statements or pricing information due to audit findings
• Accounting errors
• Retroactive tax incentives provided by government authorities
• A discrepancy may be identified several years after the original accounting for a given production month, and because many parties have input into the accounting process, there may be multiple revisions over any period of time.

Q:  Can royalty checks stop being issued to me?

A:  Yes. Royalty payments are dependent on production from wells. The well(s) you are paid from may be shut down for maintenance or may stop producing. There is no guarantee on the life of a well or the amount or frequency of revenue payments.

Q:  Will I be notified of adjustments to my check or if revenue is going to stop?

A:  You will generally not be notified of adjustments or a stop in payment; however, there are some exceptions.

Q:  How is the pricing of oil and gas determined?

A:  Crude oil and natural gas are commodities, and their value is subject to daily swings in the marketplace. These are continually negotiated to get the most favorable prices possible.

Q:  What is the difference between a royalty owner and a working interest owner?

A:  A royalty owner shares in production revenues, while a working-interest owner shares in both production revenues and development and operating expenses.

Q:  How do I calculate my decimal interest (my proportionate share of production)?

A:  The basic formula for calculating your decimal interest is to take the number of mineral acres you own, divide that by the number of acres in the unit (listed as the property description on your division order) then multiply by the royalty rate in your lease. However, there are many variations in this formula. Should you have any questions, please contact our Division Order Department for more information.

(Acres you own / Total acreage in the unit) x Royalty rate stated in your lease = Your Decimal Interest

Q:  Where can I obtain information on the value of my mineral rights?

A:  Due to the many variables involved in determining the estimated value of a property, we do not provide such valuations. However, you can contact an independent business or professional who offers this service for assistance.

Q:  What is an extension payment?

A:  There may be a clause in your lease that grants the right to extend the primary term of your lease by making a specified payment. Extensions are at the company’s discretion and, if exercised, occur at the time your lease is scheduled to expire. They are non-negotiable.

Q:  How can I get the legal descriptions for the lands I have ownership in?

A:  Any information on file with the company would be specific to the company’s operated production, which may not be an accurate representation of all your ownership in the area. 

You might consider hiring a professional landman or attorney to undertake the research required to resolve your inquiry, or you may contact the county clerk or the tax assessor/collector's office for information regarding your ownership.