Royalty non-payment

Ownership and Title
1

After receiving royalty payments from Statoil since 2011, we received no payment in December 2014. We called Customer Relations, and left several messages. The calls were never returned. We emailed Statoil Customer Relations and finally received a reply that we would not get any royalty payments for at least another year, until the overpayment was satisfied. There was a mistake in their calculations. We asked for it to be explained. We also received royalty payments from Chesapeake Appalachia.

We could follow the calculations of our number of acres, the number of pooled acres and how the decimal percentage was figured. This all matched what we had in our records, BUT Statoil added this...."which then should be reduced by the bearer group 1 at 32.5%"

They made this new calculation reducing all of the royalties we had received from them retroactive to 2011.

We asked where the 32.5% came from, but were told in an email that they had already spent a lot of time answering our questions and their time is valuable....I guess ours is not.

Is it a coincidence that Statoil announced that it bought 32.5% of Chesapeake Appalachia's assets? Did that deal give Statoil the right to retroactively reduce our royalty payments?

We cannot get a straight answer.

2

If you are getting 2 checks, then likely each WI is taking its share of production and paying royalties on that portion of production. From your information, Chesapeake has 67.5% and Statoil has 32.5% of the lease. Each WI can pay one of 2 ways:

1) Pay your full royalty decimal on its share of the production. If your royalty is 0.05 and there are 1,000 bbl, then Chesapeake would pay you on 675 bbl X 0.05 X $sales and Statoil would pay you on 325 bbl X 0.05 X $Sales. Note that each company may get a different price.

2) Pay you on 100% of production, but at a lower royalty. So Chesapeake would pay you on 1,000 bbl X 0.05 x 0.675 X $Sales and Statoil would pay you on 1,000 bbl X 0.05 X 0.325 X $Sales.

Either way your royalties would be the same. Keep in mind that one company may pay one way and the other company may pay another way. If Statoil was paying your full royalty decimal on 100% of the production and you were also getting paid by Chesapeake, then you would have been overpaid by Statoil.

3

Thank you for your help TennisDaze.