This is my second dilemma.
Jan 2015, the operating company on our property placed an oil well. They said that that the well was not producing so they filed with the RRC to change the well to gas which was approved in Nov 2015. I have seen records for the gas production on the RRC website that appear to indicate they are producing gas. However, records of the RRC do not show any OIL production for 2016 and the reports indicate that basically the oil they pumped last year was sludge (?) oil with no value.
However, today while at our farm, I was tipped off by another company that tankers go in pretty regularly to get oil for sell. We were informed that the crude oil they have obtained from the tanks is of high quality and today they pulled 177 (not sure if barrels or what) that was going straight to sell. Was told that sometimes the amount is less but that it appears they have been obtaining good quantities.
Does this seem normal? To me it appears they are getting both the gas and oil but only show an active gas well for the RRC.
How do I proceed? Do I contact the RRC or get an attorney or what? From the "other" operator I got the impression he knew more but was just trying to give us a heads up about what was going on.
Oh did I mention that we have seen NO mineral rights but I know one of the other family members did get a check for $268 about a month ago. I understand that if the royalty is under $100, they do not issue a check until it reaches $100.
Tnx! I need guidance!
First you need to determine whether there is actually oil being produced and sold. If you identify the well, owners on this site can help you confirm the RRC production records and the filings of sales revenues and volumes with the RRC. Best to give the name, RRC lease id and operator and location (county, survey, abstract, etc) Next you could be to hire an experienced oil measurement specialist who could come out the to tank(s) and measure the oil and test its quality. Then you can file a complaint with the RRC district office and someone will come out to verify. You would only hire an attorney in the event that someone to represent your legal rights regarding underpaid royalties. Before using an attorney, you should send a letter to the operator asking for an accounting of your royalties which are in suspense, i.e. being held and accumulated by the operator. Did you sign a lease and get a division order from the operator?
Also, condensate is sometimes stored on site, but more often piped off the wellhead. So you may want to check for condensate production with the RRC.
Even if classified as a gas well, a well can still produce oil. Also, ask your relative to look at their check stub to make sure it does not show some oil production. It would be pretty unusual for a company to pay you on gas production but try to steal the oil production. I have seen a few mineral ownership splits where one person owned the gas rights and another owned the oil rights, but not very common.
I'll be happy to look it up for you.
All i need is the Operator's name, Well's Name and number, County, maybe the legal description.
You can also request production sales records from the Texas Comptroller's Office. Sometimes there is condensate or other liquids that aren't reported in the regular records. The regular records just have gas and oil production figures, but taxes are due on everything produced.
Charles Emery Tooke III
Certified Professional Landman
Fort Worth, Texas
First I would like to say that I trust what Wade and Tennis have already said to do; but, I would like to add my two cents worth since I went through this route back in the early 80's!
A lot depends on how your lease is worded and if you own the mineral rights or what percentage of the mineral rights you own and if you own the surface rights as well and where you live in relation to the well site location. Sounds like you have already done some of the important leg work. Now the next step is to determine if this oil is truly salable oil or just sludge and water or is it condensate. Now it is time to do some real snooping and fact finding because IMO, you are not going to get much if anything out of the company or the RRC. You can hire people to do all or much of this investigative work or you could if you feel capable and the lease or surface ownership doesn't prevent it, you can basically do most of this fact finding yourself.
Not that I recommend this, because every situation is different; but, in my case, my family owned both the minerals as well as the surface, so I literally went out to the tanks and carefully checked them out to see if there was any great safety concerns and to see if there was a stairway or ladder and an easily open surface hatch. Once I was satisfied that I could get the surface hatch open without breaking a seal and I felt comfortable with the safety concerns I purchased a metal tape capable of reaching the bottom of the tank, along with a metal plumb bob and a tube of water indicating paste, then I went to the tank and carefully opened the surface hatch, covered the metal tape with the water identifying paste and let the tape drop to the bottom of the tank. Once I pulled the tape back up, I was able to see where the water level of the tank actually was. In my case, there was some sludge in the bottom of the tank, so my measurement was not perfect; but, it gave me some indication of what I had. I had already made a device that I could put a bottle on and lower down into the tank and take a dip sample. After talking to some of the local folks, I then took the sample to a lab. That lab sample now gave true data that there was oil in the tank. I then took outside measurements of the tank and did the volume calculations to determine how much actual "oil" was in the tank. Once I knew that I had oil that I was not being paid for, I took a week off work and actually monitored the tank and the trucks that came in to haul it off. In addition, I followed two different trucks to see where they were off loading the tank material. Turns out that we had three tanks and there was very little bit of water actually going into the tanks so everything in the tanks was salable material which was actually being sold. With that information in hand, I then went to my attorney who took it from there. Not a good scene and don't expect miracles to happen; but, from that point on you can make things happen.
A big note to say here is that there are lots of variables in this process, especially a lot of safety concerns if you are not familiar with working around potentially hazardous or flammable materials, plus many oil tanks have sealed surface hatches and many production fields have some poisonous gases, like Hydrogen Sulfide present and basically all will have some flammable gas at the surface of the tank. So beware! Physically checking the tanks may not be your thing; but, basically anyone can do the PI work of following the trucks and talking to workers, it just takes a lot of time.
Good Luck!
You have received a lot of valuable information that you can safely rely on it. Also, buy and hide two cameras to see how many truck loads of oil/condensate and salt water are being removed. Don't put the cameras too close to the well since they will be looking for them.
Bob Malone
Malone Petroleum Consulting
Thanks everyone for the info. I am waiting for one of my cousins to send a copy of their check stubs. Although there are four families that own mineral rights, my siblings and I own the surface owners and 1/4 mineral rights. There is no specific designation between the gas and oil royalties between families.
Our farm is in East Texas and we live in the DFW metro area. So, making daily checks would be difficult. However, the camera suggestion is great! We did take photos of the tanker yesterday and it was the driver who told us the oil was going straight for sell due to quality.
I will send Charles the well ID.
You have no idea how much I learn from you guys!~ I really appreciate it!
I'll be happy to help!
Motion activated wildlife cameras are reasonably affordable and already camouflaged. I would imagine many of them come with time and date stamping capability, which would be helpful in Court.
The fancier ones might even email you the photos as they are taken or text them to your phone, like a Baby Cam, although the distance might make that a little difficult.
Just out of curiosity, who is the Operator and what company is Trucking the fluids out?
Charles, great question!!!!
I am T Valley's son Klint. I am here with my mom trying to help her with this matter. I have been trying to visit the property more often to get an idea of what is going on. Valence Oil is the company and the truck that picked up the oil was Lions Oil. I spoke to the driver who informed me he was picking up 177 barrels? He said it wasn't "Texas T" oil. referring to the oil as not real dirty black oil. He said it was a real good quality oil, he said something about the oil was 49.6% but I cant remember what he was referring to. He stated he was a new driver and that Valence oil will call when the tank is 8-9 feet to come pick up a load. He said the former driver told him the well would put out 2-3 barrels some days and 50 barrels other days. I'm trying to upload a photo of what I printed from the RRC. Thank you everyone for your input so far. I am planning to take my camper down there when I have a weekend off to monitor traffic in and out.
879-oil3.PNG (712 KB)
880-oil1.PNG (1.03 MB)
881-oil2.jpg (262 KB)
Klint:
Just to make sure you've seen these disposition codes.
http://www.rrc.state.tx.us/media/24470/pr-disposition-codes.pdf
Just from looking at this disposition report, it looks like there is very little gas and gas is extremely cheap right now so even under the best lease royalty conditions, there won't be many dollars to play with. Now, looking at the oil, they have reported a little less than 1100 bbls of fluid leaving the facility. Assuming that it is even close to 50% water, there still wouldn't be much more than 500 total bbls of salable crude. Even at $50/bbl and the market has been considerably worse than that for most of this report. Still that would be a total production of maybe $25,000 total production for the entire pool. Assuming that you have a 20% royalty, the total mineral owner dollars would be around $5000. Without doing a lot of research, I didn't try searching the exact location and the number of acres in the pool which could be minimal if this is a vertical well or it could be quite large if it is a horizontal drill.
Also, without doing the research we have no idea how many acres of your farm is in the pool. Once the pool size is known, and the number of farm acres are in the pool, we could establish the approximate dollars allocated to the farm royalty, then you guys only have 25% of that, so the dollar value could get rather small in a hurry. Of course, this is assuming that these guys are playing straight.
Again, I say good luck!
The oil production and disposition volumes are oil only. The water will have already been separated on the tank battery facility and separated into oil and water tanks. The RRC requires that oil and water be reported separately. Furthermore, the trucking companies will not pick up oil that is not merchantable (ie it must be ready for immediate sale). The trucker tests the oil before picking it up and will only take the oil if it can go straight to sale. The operator is charged for requesting a pick-up of unacceptable oil. The 49.6 reference is most likely for the gravity of the oil. The saltwater is hauled off separately (pipelined from larger facilities) and that is why you are also seeing the skim oil reported which was recovered from saltwater disposal facility.
On the RRC website - Data Online Research TO Production Reports (Form PR). Enter District 05, Lease 278524 and Gas Well. Select only one month range, for our well try Dec 2015 & Dec 2015. In upper right corner, you will View PR Image. Open the pdf and now you get the filed report. It includes the preparer's name and phone number. (This pdf is only available for a one month range and not if you look at multiple months of production.) Now you have a contact name for questions or to ask who is responsible for your checks or for oil sales information, etc.
I have posted before about going to Texas Comptroller CONG site for reported sales revenues. This is gas well. Enter CONG and select Lease Drop-Natural Gas. Use Lease 278524, County, and Date Range 1503 to 1603. See that only gas sales and skim oil/condensate are being reported. (If this were an oil well, then you would need to check Lease Drop-Oil but there is nothing there for this well.) Ask Nikki at Valence why the oil sales are not being reported. If they are being combined with some other well for report to TX Comptroller, then that needs to be corrected. You can also contact the CONG and report that the oil sales are missing.
Do not be afraid to ask questions. If you do not get a response to verbal questions, then send a written letter demanding answers. Send by certified mail if necessary.
Have you received a division order? If so, then check about minimum suspense clause. You can change the clause to ensure that your royalties can be held until $100 or December 31 of each year. This way you get a check every year instead of funds being held for multiple years. That way if the operator sells the well, you are not behind and trying to figure out whether the old operator or the new operator will pay the back royalties.
Good luck!
Here you go!
It appears that the Phillip Coker #1 was first completed as an Oil Well with Casinghead Gas, then later converted to a Gas Well with Condensate (the distinction is determined by the Oil to Gas ratio).
The numbers shown in your attachment "oil 2" appear to be those figures reflected in the One Page Production Summary on Page 22 of the attached, so everything appears to pretty much "Kosher" to me.
You could touch bases with the people at Lion Oil Trading & Transportation and ask if they were disbursing royalty payments during the 10 months they were paying the Severance Taxes. They may have royalties due you.
Otherwise, the royalties will be coming from Valence Operating, whenever they do come. Perhaps you should check with them and make sure they have your correct address, etc.
Have you received a Royalty Division Order from them?
Hope this helps -
Charles
878-PHILLIPCOKERNO1.pdf (2.03 MB)
Hello to the Valleys!
I just spent the past few days cleaning off my desk and found some records on the Philip Coker No. 1 that I had pulled up for you back in April.
And, yes, as a matter of fact my desk was that messy... I only get around to cleaning it about twice a year - when it starts to bend under the weight of all of the paperwork piled on it.
I just thought I'd check with you and ask if you have you straightened out your situation or do you need some additional assistance?
Charles
