My family owns the bulk of interest in the Kennedy Unit gas well in Hill County, Texas, and we need some help with an issue that has come up with the operator, Diversified Energy. Our last check from Diversified was in February 2023 and covered gas sales from December 2022. We have not received a royalty check or statement from them since that time, even though they have been reporting the following gas sales to the Texas RRC:
We have spoken with Diversified about this issue and they claim that there was a past error with reading the meter and that we (and other interest owners) have been overpaid. We have asked for some sort of statement or reconciliation, but we have not received anything from them to date.
A few months ago I sent them a certified letter demanding payment and a royalty statement. There was no response. It has been 15 months since we have received anything from them.
Are there any recommendations on where we might go from here? Anyone ever dealt with an operator that claimed a “meter reading issue”? We really don’t want to get a lawyer involved, especially with gas prices being what they are, but we are tired of being left in the dark.
Meter errors do happen. It can be difficult to get a statement out of an operator while they are recouping an overpayment. You can request a number of how much they have overpaid you and hope that they will respond. I just had this issue with another operator. After many months of no information, I just ended up with several hundred pages on the statement of corrections once I was back in pay. The gas numbers listed above are very low, so it may take a very long time to correct the payment issue as gas prices are low right now. Also, look at your division order because you may have had a $100 minimum. At low volumes, low prices and a DO minimum, it may take a while to get back to a check. You can send a letter by certified mail return receipt back to the operator and request a minimum payment of $25.
Not sure about your area, but there are some parts of Texas where the gas takeaway prices are zero to negative, so the operator may not have any revenue to give to you at this time. As more pipeline capacity becomes available, that situation may rectify. Many of the analysts have predicted a rising gas price toward the end of 2024 into 2025 & 2026, so one can hope!
Paul, you are getting sound advice from Barnes. Since you do not want to hire a lawyer, your alternative is patience. You can contact the RRC and inquire on gas sales as they apply to severance tax data. This would allow you to discover price and gross sales information. If you can get the data, then it will be quite the task to develop a usable analysis. Meter issues do happen and take some time to rectify between the operator, purchaser(s) and pipeline to establish a current position.