Can someone clarify the rule on interest paid by the oil company if no payment has been made within 6 months of first production date? Is this correct or is it they have to mail division orders by that date
Revenue must be paid within 180 days of 1st production. If not, there are 2 scenarios- #1 If there is clear, marketable title, interest is owed at 12% per annum, compounded. #2 If there is not clear, marketable title, interest is owed at the prevailing prime interest rate, currently around 4.5%, per annum.
These new rates took effect November 1, 2018. Prior to that, scenario #2 above was 6%, per annum compounded.
Hope this helps.
Todd M. Baker
That helps a lot thank you
Todd; At what Intervale is it Compounded ? Thanks John
I believe the start date is actually first sales, not first production. If the first sales are after the check cut date for the operator, then the payment could slide a couple of weeks until the next check cut date six months later. Division orders usually show up at about five months after first production. Sometimes you have to request the interest as they may “forget”. With many of the two section multi-unit wells, they have hundreds and hundreds of titles to check, so it does take a while.
Compounded yearly. And it is date of 1st production, not first sales.
Respectfully, Todd M. Baker
K Thanks for clarification.
John
Title 52. Section 570.101. Proceeds from the sale of oil or gas production from an oil or gas well shall be paid to persons legally entitled thereto:
a.commencing not later than six (6) months after the date of first sale, and
b.thereafter not later than the last day of the second succeeding month after the end of the month within which such production is sold.
Goes on to mention the 12% if they are late.
Here is the link. §52-570.10. Payment of proceeds from sale of oil and gas production, Okla. Stat. tit. 52, § 570.10 | Casetext
Does anyone have the exact citation for the change from 6% to something less for non-marketable title? This section still reads 6%, but I heard it was changed. Just can’t find the exact quote.
D. 1. Except as otherwise provided in paragraph 2 of this subsection, where proceeds from the sale of oil or gas production or some portion of such proceeds are not paid prior to the end of the applicable time periods provided in this section, that portion not timely paid shall earn interest at the rate of twelve percent (12%) per annum to be compounded annually, calculated from the end of the month in which such production is sold until the day paid. 2. a. Where such proceeds are not paid because the title thereto is not marketable, such proceeds shall earn interest at the rate of (i) six percent (6%) per annum to be compounded annually for time periods prior to November 1, 2018, and (ii) the prime interest rate as reported in the Wall Street Journal for time periods on or after November 1, 2018, calculated from the end of the month in which such production was sold until such time as the title to such interest becomes marketable or the holder has received an acceptable affidavit of death and heirship in conformity with Section 67 of Title 16 of the Oklahoma Statutes, or as set forth in subparagraph b of this paragraph. Marketability of title shall be determined in accordance with the then current title examination standards of the Oklahoma Bar Association.
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Thanks! I knew it was something different and quite a bit less.
Do you have sample wording to send to get interest? Red Bluff has been selling oil from our well in Kingfisher County since last August. We haven’t even received a division order. The corp commission said they haven’t completed the paperwork to even post the completion!
You might be just a bit premature in asking for interest. If this is a multi section well, they cannot do the division order until they get the official splits of the percentages for each section. They cannot pay the interest properly either because it would be incorrect. I would hold on for another month or two until they get it figured out. You will just get more interest that way!
We contacted Red Bluff 2 weeks ago re: Short 1-23MH. They claimed they filed the completion order with OCC on 1/28, but that “they were probably just behind” posting them. I have seen many completion orders posted since 1/28. They also claimed there was some confusion on the name on our interest and they had posted under someone else’s and would get a division order out to us in a few days. Of course we have never seen it. My sister-in-law also has interest so I had her call and they told her they couldn’t even find her name and would have to “look into it”. I have a bad feeling about them. Anyone we can contact to look into it? The well began sales in August 2018.
Never hurts to send a certified return receipt letter (and keep a copy) with a copy to the OCC. Your sister should send one as well. Also request your interest payment. That may kickstart them.