As someone new to handling inherited royalties and a few mineral deeds, I would be grateful to hear how folks organize their files (paperwork) and how to best organize bookkeeping (by hand or computer.) Until I get organized, it all seems overwhelming. Thanks for any suggestions.
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As a recent inheritor I came up with a colored file folder system. Relatives have also used it with success. The file folder color is used for Companies and Counties. I use yellow folders for "Miscellaneous"info about Comp’s (contact info, direct deposit, web page printouts, newpaper articles, etc.)and Counties (newsp articles, day to day correspondence, etc.). Purple (new file folder boxes may have orange instead) I use for each County’s taxes and I put a copy of the tax for each Company’s holdings on that bill in that Company’s purple folder. That lets me know what the County info is for each company’s holdings. Red folders are for “Recording” info - the initial recording, probate doc’s, etc. to establish your ownership with the Counties and the requests to the companies to start sending you checks (The correspondence with the counties and the companies both get info about the deceased, owner #, last address, lease names,legal descriptions and %'s; your contact info.) Green file folders get Division Order copies that you get in your name. I use 1 folder per Div Ord because these are sold or transferred to other companies. An optional cross reference is to put a copy of the front page of the Div Ord in a green County folder. this lets me compare %'s, etc. within the county. Most importantly, copies of checks and production run lists go into a blue folder. Again as an option, I put a copy of the check in a blue folder for the County - this lets me know the activity in that county. I make a plain manila folder for each plot inherited for that legal description (in Texas, Block and Section, etc.) I put maps, plats, and maps of that Section (usually) from the Railroad Commission (very helpful site for a newbie - instructions for using it are probably on this website. Gave me an idea of where the properties actually are and how much activity or plugging of wells is in that area. To get really into the weeds, you can click on a well to see production data-I don’t yet know how that corresponds to my checks) I have a file drawer by County Current that has the tax, Div Ord, check copies, misc and maps for that County currently (2-3 years). I have a file rack for the blue folder Current Checks by company for the full printout for the runs. Because the paperwork piles up, I have file drawers with previous year active and inactive company transactions. Finally, I have file drawers by county/ legal description to keep track of previous year transactions/maps, etc. in that county. I am a retired real estate appraiser so I think in terms of legal description (which doesn’t change) rather than Company (which do change). I’m an old guy familiar with computers but I trust these paper copies of stuff and have had to refer to many of them in the past few years to make sure the paperwork I receive is correct I use a spreadsheet for the year where I note gross, expenses/taxes, net and any withholding (New Mexico). The year-to-date totals I compare to the 1099’s I get. I do not yet track income from each well - even for the relatively modest number of wells I’m getting paid for, that hasn’t become a necessary use of my time so far. Might work for you. I also have a spreadsheet for Division Orders by date with columns for Company, legal descr, %, and previous Company, etc. I have 25+ properties in 9 counties and 20+ companies so this is the best tool for helping keep this stuff (to be polite) straight. It drove my dear grandmother crazy and that was without computers. And the paperwork and taxes don’t stop with $25 oil! Hope this helps - good luck.
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Wow, your information is BEYOND helpful. I really had no good place from which to start and you have figured it all out. A million thanks!
I keep both hard copy and electronic files. I have them organized them by Lease, Sub-chapter: By well. Be sure to keep ALL Division Orders, Leases, documents by which you received or inherited the minerals, and your monthly statements.
Electronically, I keep docs on my computer, that is religiously backed up on an external drive as well as a 4+1 Drive Array; in the cloud both on Dropbox and on iDrive. If you think I’m a bit paranoid you’re right…but when you have to haul an oil company into court (or they you) all of the historical documents are available–saving you thousands of dollars in legal fees…especially so if you’re like me and are the Executor of the Estate(s).
Good luck…
The best system is the one that works best for you and is usable-constantly.
There are many good ways to set them up. I, too, was an executor or helped executors of several estates and good files are a must! I have reorganized 20 plus filings cabinets a few times until I was happy with the result and could find everything I need.
We keep files in both paper form and digital form. I am gradually converting to digital as time allows and scan everything point forward. Backed up in DropBox and by Carbonite and by desktop hard drive.
We keep both master lists and individual files for different purposes.
Examples of master lists are: Master Division Order lists by well (as operators change)
Master Tract reference list
Master Activity List with tract, date and notes (as nearby tracts are useful to other tracts), lease offers, buy requests, final decisions, etc.
Master list regulatory activity (we are mostly in OK, so easy to find)
Master payment list by company
Master company contact list
Master income tax file list by year
List of 1099’s by year.
anything else you can think of…
On our individual tract files, we file them by legal location.
State, county, township, range, then section. (We are in OK)
Tract description OK-Garvin-01N-01W-01
Maps of outline of tract, Master Title Plat from the Bureau of Land Management and any new surveys that may affect the acreage
Inside folders
Origination documents-Title, deed, probate or anything that grants title, copies of wills, Declaration of ownership for states that require it.
Correspondence-filed by date, oldest at the back. Requests to lease, buy, phone conversations, etc.
Leases-filed by date, oldest at the back
Regulatory paperwork- for OK, OCC cases and orders,
Wells-permit, spud date, competion report, Division Orders, documents that went with the well such as plats, surveys, etc. , change of operator and subsequent Division Order
Misc. Bankrupcty files until they are settled
Class action suits until they are settled
Since we have operators that pay on different wells, we keep our revenue records different from the tract records. Our accountants give us various reports that I file by year. Tax files are filed by year. We save all check stubs for at least seven years. All income tax final reports forever-at least digitally.
I use Excel for most everything. Some folks use other data bases. There are software packages out there. Most are very expensive, but not all. A fairly new one is listed at the top of the page.
I do not file much by operator except revenue. They keep changing. The things that are more stable are the tract/property and the wells that fall under that tract.
Revenue files- I file the monthly revenue check stub, checks, deposit slips, etc by month and upload to the accountant digitally.
I have a master file of templates of letters, replies to force poolings, lease requests, direct deposit forms, NADOA Division order forms, etc.
Procedures and Documentation folder where I put notes, lists of the important excel files and what there names and descriptions are-for my kids when they take over.
Progress Notes & To-DO lists
Reference files of important articles, basin wide geology, activity, strat columns, maps of the reservoirs
Tax Files- Preparation Documents-filed by year along with Final IRS upload.
Software files
Passwords stored in something safe like 1Password.
Wills, Birth Certificates, Death Certificates, Marriage, Divorce decrees, Ancestry trees, Addresses, phone numbers, Trusts, etc.
Hope this helps.
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Your information is much appreciated. One question (or two): Do you send the royalty check statement to your accountant (some of ones I get are 250 pages long!) Is your accountant a specialist in oil and gas matters? Thanks again for your detailed description!
Yes, I scan them and send them the complete run sheet (I can guess which one that is…) and check for every payor. I upload the into their secure drop area. Some I get by mail and some come via oildex or other vendor. Be very careful with oildex statements. Make sure they actually match the checks…
Yes, I have an excellent accountant who is a specialist in OKC. They are also licensed in other states.
Excellent advice. So, so companies sent hard copies as well as electronic copies if requested to do so? Thanks for taking the time…
Many companies will send hard copies if you ask them. Some will only do online. Personally, I prefer the hard copies attached to the check because it is a lot easier to make sure the check actually matches the run statement if you have them both in your hand. If you get a hard copy check and an online statement, that is one more gap in days that you may not want. If you get a auto-deposited check and an online statement, some folks never look at them and then run into trouble at tax time. Some folks love online. It just depends upon how much time you have and how computer savvy you are. While you are setting everything up, you might consider changing all the Division Orders to a minimum of $25 instead of the default $100. Makes for more frequent checks and the ability to make sure none are missing. Also, I use the NADOA form, not the company form unless it is NADOA. You do not want them changing any terms of the lease.
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I only get a few online statements but they often differ from the written ones. I don’t have it in me to peruse many multiple pages of small type to search for the discrepancies. Perhaps I just need to determine exactly what information accountants need for year-end reporting so I am only providing what is required.
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You can ask your accountant what they need. It may only be the 1099’s. You do need to watch out that you are not getting shorted. Not sure what state you are in, but post production charges can be quite extensive and if your lease says they should not be charged, then you need to really watch out for that. Many of the accounting software packages for the operators have settings which automatically charge for post production costs. If you lease prohibits them, you have to contact the operator to change the settings for you-and keep watching. When there are software updates, the settings may revert back to a default.
@JackieD you’ll notice that we have a software section on our Service Providers page. Have a look there to see if their offering matches your need.
This is one of those insightful statements that can easily be missed in these types of decisions. It is very applicable here.
I was gifted fractional interest in about 250 properties in OK & TX a few years ago and was stunned that the only record keeping software was practical only for huge companies who can afford thousands of dollars. To keep myself sane, I developed an integrated set of Excel spreadsheets that uses Operator as its key field. On the master log sheet, I create an entry for each well / property that puts data into separate fields for API, lease number, state / county/ section / range / township, well name, other descriptor, percentage owned, bonus, royalty type and rate and a field for communications. The communications field is a large text field where I add dates and notes as needed in reference to the holding - like “1/12/20 - transferred to new operator X; 5/5/17 - DO signed.” I use separate but linked Excel sheet to log the income by year from each active property, breaking out the taxes and fees from the production reports as I go. At the end of the year, I use it to reconcile my 1099s and provide a handy one-sheet to my CPA. I also keep a separate sheet for property taxes paid by year.
I scan all documents and include the name of the operator, county, state and date in the file name so searches are fairly simple (Ex: Halcon_010320_Ward_TX or Coffeyville_DO_070417_Pont_OK) . I file operator correspondence (like DOs, Lease agreements, legal packets) by Operator and file checks and production reports separately by year. I mirror all electronic files with paper ones, though I’m considering stopping the paper versions.
What makes this system work for me is the Master Log in my Excel spreadsheet. I can filter the log records (which has more than 500 entries at this point) by any field - operator, county, section, range etc, or do a keyword search on the whole thing. Once I’ve located the record, the on-going data I have entered tells me where in my files to locate all associated documents. Yes - it’s a crap-ton of data entry, especially at first. But, I have found it’s far less trouble to add new info as I go along and I can easily find what I’m looking for (usually.)
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Sounds like a solid way to keep tabs on everything. I have never created a spreadsheet in excel myself…So far I only know how to enter the data. It how hard can it be, right! Thank you for your I depth description. I feel better just having this information, and hopefully I will be able to utilize it.
Where is the Service Providers Page?
Look in the Directories Tab at the top right.
My system is simple and basic. I set up a file on Excel (Oil royalties 20xx) When a statement comes in, I note the date, gross amount, taxes, other deductions, and net in separate columns, with a sum under each. Then for the next company, I do the same, titling each cluster with the name of the company. At the bottom of the page I sum up the grand total - a figure the tax man doesn’t need but I like to have anyway. I do my own taxes and I’ve never found I need more than that information. So when EOG sends me a notice listing a dozen different wells and their production, I don’t need to itemize every well, just the total. At the end of the year, the oil company sends me a 1099MISC, which is the number I have to put down on the tax form, but it allows me to follow what’s actually going on and make sure I haven’t missed something. the statements them selves I file in a bin until such time as they can be disposed of, but I’ve never had to go back and check.
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Woops, my bad… there was an error in the link I placed in the previous post. It’s fixed now.
That sounds easy enough. Some of my statements have information from 3 or 4 different states. Do you find it necessary to keep info from different states separate?