I am still trying to understand the calculations made by the operator in payment for royalties I received for the first six months of production.
In order to ask questions of Camino I need a better understanding of what to ask.
Under this same lease an old well was drilled in the early 1990’s by Anadarko. The lease was sold three times. All the statements I received listed the the barrels of oil and what it was sold for. Then the gas and what it was sold for. The taxes were deducted and that was it. Very simple.
With Camino they have a product code 200 for gas but there is nothing in the statement that shows sales for gas. There are plenty of listings for Plant Products. There is also a product code for 204 but no listing for that is in the Legend. I am waiting for Camino to tell me what that is. Is there no GAS that comes out of the ground here that is sold as is without the processing that is being done? It makes for quite a difference in price.
Another thing is the average price of WTI oil shown on the internet and what Camino is selling it for. In April the average price of oil was listed as $29.38 and Camino sold it for $17.64. That is quite a difference. The difference in price (average listed on internet and what it was sold for) range from $4.00 to the one I just listed for April. Several others are much more than $4.00. What are the reasons for the differences in prices?
Thanks to this forum I am getting the interest recalculated. They paid me for just one month of interest and owe me for six. They thanked me for bringing this to their attention.
All gas will go through the gas processing plant. It will strip out the methane (“plain gas”) and the plant products-ethane, propane, butane, iso-butane, etc.
WTI is just that. West Texas Intermediate sweet oil generic price. Anything sold in OK will have adjustments made for sulphur or other impurities, contracts made with pipelines, day it was sold, etc. You can use the difference in your past checks price versus WTI as a general guideline. Also, if there was condensate with the gas, it will be sold as oil, so that may also be a factor. This year has been crazy on prices so when your wells came on line will make a difference. What is the S-T-R and name of well(s)?
This first portion is my email with questions to Camino
There is no product code 204 listed in the legend portion of the payment calculations. What is the product 204? Why is there no sales of just plain gas? Why is there such a difference in what Camino sold oil for and the average price of oil on the open market? In February oil was sold for $48.99 and the average price of WTI was $55.66. In May the average price of oil was $29.38 and Camino sold it for $17.64. Oil was sold for $32.36 In June and the average price of oil was $40.27. July oil was sold for $37.37 and the average was $42.07. There actually is a difference of about $4.00 on all other sales when compared with the average. Why is that? This same thing may be true of the gas but since there is nothing shown for just plain gas I can’t make those comparisons.
I had another well under this same lease drilled by Anadarko in the early 1990’s. The lease was sold several times and I was paid by three different operators. There basically were no payment calculations involved. The statements I received listed the sale of oil and another listing for gas and the taxes were deducted. That is all. The gas was sold as gas. There were no plant products.
I would appreciate a reply so that I can better understand these discrepancies.
The following is Camino’s response to my email above.
Here is the response from our Revenue department: Depending on our oil contracts, we will have a difference in price to what was sold in the nearby market. We do our best to get the highest price we can for all of our wells. You are being paid the price that Camino is receiving for that product. Residue and plant products are paid for the total gas stream out of the well. You typically get more money for your gas when it is processed and that is why we have contracts where we get paid based on both products not just unprocessed gas. To do a comparison on the gas pricing you would need to convert the gallons to MCF and use the overall value and add that to the residue price. Not very simple but the only way to compare apples to apples.
Martha:
If they are selling my portion of the gas as processed gas and that is what I am paid for then I am paying for processing the gas. Is that correct? \My lease states I am paid for products “from the mouth of the well”. There is too much information here that I don’t have access to and probably couldn’t calculate it if I did have access.
Also, can the difference in price Camino got for the oil and the price on the open market during the period I got my first check (Feb 6, 2020 and end of July, 2020, be attributed to the costs of the things you mentioned above for WTI? Why would it vary so much from month to month? One month (April) there is a difference of over $10.00 in the listed average price of WTI and the price Camino got for it?
It’s probably useful for you to check the Oklahoma Tax Commission’s site: Oklahoma Tax Commission - All Taxes - Gross Production (click here) - Public Pun Search - Search Pun - Search by Legal - input your Section, Township, Range and look for your well. This site lists reported sales from the well, by product. Your well is very productive. I think you and the operator are always better selling gas products, e.g. liquids, extracted from natural gas than straight natural gas that’s used to produce those liquids. Some operators call oil “condensate” but it’s listed by the OTC as oil. If your OTC production numbers don’t match your operator’s production numbers, you should ask your operator why. You probably should also check the Oklahoma Corporation Commission site for your well’s production. The OCC lists only a well’s gas production, not oil production. The OCC web site is down right now.
The gas is processed according to its components. The operator pays for the processing. As a mineral owner, you are only charged for your portion of the post production costs if your lease allows for it. That depends upon the wording in your lease. If you had an old gross proceeds lease, then you may have some fussing to do to remind them that you have a gross proceeds lease. Some companies are interpreting those leases more to their favor than ours. “At the mouth of the well” is interpreted differently in OK than in Texas.
On the oil, yes, the price differential is due to impurities in the oil, contracts for transportation, etc. I usually look at the average differential on oil prices for a whole year instead of month to month.
Also the OTC amounts are likely to be fairly correct on oil, but the gas will not match your stub in most cases unless you have pure methane. It is more of a back calculated number which may or may not include plant products (depending upon the operator). I look for a general close range, not an exact number.
I am not an attorney, so will let one of them answer correctly in legal language. Repeating what I have heard multiple times from multiple attorneys at conventions or classes-OK (and states with similar reading of the law) is an “implied covenant to market state” which means that the operator has to get your product to market without charging you your proportional part of the post production charges (unless your lease allows those charges.). “At the mouth of the well” is not relevant. TX and other states like it do charge the mineral owners their proportionate share of the post production costs unless their lease forbids it. So completely opposite. “At the mouth of the well” is very relevant.