I am a mineral owner in Converse County, Wyoming and have producing wells under lease.
We have been receiving royalty payments for 1-2 years now monitor the activity on the Wyoming Oil and Gas Commission site. Each month we receive a statement and check within the first few days of the month. There continues to be consistent production and sales activity. When we did not receive a check this month, we contact the oil company we have our lease with. The reason they gave us is that we are now in a negative balance due to accounting adjustments. The very same day we noticed an article in Bloomberg regarding billions of oil reserves disappearing in a puff of accounting smoke. Is anyone familiar with this or had the same thing happen. The article certainly refers to oil that has not been produced yet, but it seems odd that we basically received the same explanation related to our royalty payments.
Would like to hear if any of you have comments about this.
Thanks!
The disappearance in oil and gas reserves has nothing to do with royalty payments. It is something oil companies pressed the SEC to boost the amount of money they could claim for the value of proven reserves. The problem with this is that they had a 4 or 5 year time period to drill the proven reserves. The accounting formula used is about to expire if the wells have not been drilled. That is where the disappearance is going to happen. Basically they will not be able to claim the reserves.
As to accounting adjustments. Quite a few operators are claiming that they have made payouts on royalties incorrectly. Whether it be a price, volume, expense, or any other issue they claim. Some may be valid and some may not be. It will depend on the circumstance and the lease terms. If you have only a few wells and can do some of your own royalty review I would try to do so. If you have more than just a few wells and good income, hire someone to do the review for you. They would be able to find underpayments where you may fall short. Some reviews are simple and others are very complicated.
Thanks - that confirms what I thought, guess it's time for an audit.
It could be Ad Valorum taxes. We are also in negative balance this month in Converse County and after about a week I reached the right person who could confirm this.