I am looking for information if there is anything I can do. I have been a holder of a percentage of an oil lease in what is called Wilmington township in California. I am more likely one of many in the same situation. This oil reserve is operated by Warren Resources and I have been receiving monthly royalties from this township since 1995. In September of 2024 my monthly statement starting showing deductions for almost half on my normal monthly income. I contacted Warren Resources with my concerns and this is what they emailed me:
(Warren switched to a new accounting software back in June. An audit was conducted at that time where it was discovered that post production costs (PPC) had not been properly charged. The decision was made that no attempt to recoup past deductions would be made but that charges would be applied going forward for current PPC. The deduction that you see on your statement are in relation to these costs)
I know I am probably not alone that for years I have been counting and expecting these monthly payments, and now it half gone. Is this normal procedure to do to shareholders after years of payments.Plus no one ever received any warning that this these extreme deductions would start.
Yes, this sometimes happens. If your lease allows for deductions, they are within their right to start charging them at any time. You should read your lease and make sure it allows the deductions they are now hitting you with.
If your lease does not allow deductions, then contact the operator. Some accounting systems have an automatic setting to take deductions, so they may have to reset your file to not take them out for you.
PC33- when you say a “shareholder” do you mean a mineral owner or are you an owner in Royalty Fund operated by Warren Resources? From your post my guess is you are a shareholder in a royalty fund. The others have replied as though you are a mineral owner with an Oil & Gas Lease on your minerals.
Wilmington field has a long history. It is the only field in the US that I know of where one of the Operators in the field is a City, the city of Long Beach, CA. There are some complex instruments of conveyance related to that field as well as the unit agreements for operations. Your answer will require research and diligence.
I understand that it’s going to take some time and effort to research this. The new deductions in question have no details to them. When I contacted them they stated that when they had a new audit that post production cost had not been properly taken. At this time they would not try to recoup past deduction but would go forward with new deduction.
Warren resources was a Warren Buffet company but went into Chapter 11 and Blackstone now controls it. Maybe now Blackstone has to produce more income ?
I was thinking that they are trying to pay for all there legal expenses. They have been in a lawsuit with the city of Los Angeles for some time now. The city of Los Angeles has been trying to stop all drilling of oil . Warren is suing the city over the oil and gas ban. Can they pass those legal expenses to royalty owners?
Thank you for the information.I believe my next move is to contact Warren again and ask for an itemized list of charges, and also contact the city of Long Beach oil resources.
You need to look at what CA laws are for owner inquiries to operators. Most states provide law where the company must respond and provide you reasonable information upon a formal request (certified mail). I’d send a certified mail request for details of the deductions, the type / nature and specific amounts etc. A full breakdown.
If you don’t have a copy of your lease and any subsequent ratifications, agreements, and/or modifications, you will need to do title research to find them - or ask the operator to provide them. It’s difficult to answer if the deductions are allowable without knowing the terms that have been previously agreed to and you are subject to.
@Kitchen , Wilmington is a very old field generally within the confines of Long Beach (Circa 1938). When the field was in the early stages, there was a great deal of speculation with promoters selling a diverse set of participations from MD, RD (NPRI), WI, Community OGL Agreements, and many more creative interests. On top of this, there were a vast number of city lots that were leased. Due to this level of activity, it is crucial that @PC33 do research to discover the basis for his interest. This is a challenge for the novice in LA County since the records are only digitized from 1977 to present. Pre-1977 Land records are maintained in the Norwalk office is various forms that can be difficult for a professional to navigate. Best course for Phillip is to keep working with Warren to determine the basis for the charges. Patience and diligence will get him to the answers. @PC33, maintain an email chain or thread as well as detailed notes on all communications with Warren.