A recent royalty check detail statement had negative gas and NGL volumes and amounts. I questioned the operator as to why and received the following explanation: “The well is on gas lift and was shut in while we drilled and completed the infill wells. After a well that is on gas lift is shut in, in order to turn it back onto production, we must fuel the gas lift system again and only water is produced for a long period of time (or majority water). This is what is causing the negative production.” Did the operator handle this correctly in charging royalty owners or should the fueling of the gas lift system be treated as a lease operating expense and charged solely to working interest owners?
See what happens over the next few months. It may clear up. Fueling of the gas system is an operating expense in my mind. I would push back and ask why they are charging non-operating royalty owners.
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