Hello everyone….
2024 was our first year of receiving royalty revenue after waiting more than ten years since signing the first lease. Very fortunate indeed and grateful.
Understanding the Antero statement each month however, invariably leaves me with questions that are tough to comprehend.
Appreciate anyone with knowledge and understanding weighing in…
Understanding that the acronym “PPROD” on the statement represents the “plant products” or “Non-Gas-Liquids” that result after the processing.
We have interest in a parcel of property that is split between two wells.……Gump 1H and Arenado 1H.
We are receiving “PPROD” for Gump but not for Arenado.
How can that be?
Same lease, same parcel, split between two wells. Different pay categories.
This was only one example. All our leases were negotiated with no post-production costs, or “gross proceeds” and there are other examples where certain wells receive PPROD and have “SHK” loss and others do not.
Anyone else experience similar?
Thanks in advance for any info.
This would be a great question for Antero. Be persistant. Somebody in this group might be able to answer it but Antero should have some kind of answer for you. The SHK is explainable but I am still a bit fuzzy on it although I have talked with Antero about it. If you find out anything interesting, please help the group understand.
Thank you Nancy. I received a reply from Antero today. It sheds some light, but much like previous questions, it’s like they answer a riddle with another riddle. I will type up their response.
Looking forward to reading what the said. Not surprised about the riddle!!
Well, we did receive a reply from Antero (Land Administration). They stated that we indeed are not paying “Post-Production Costs” as outlined in the leases. However, my wife (and her father and sister) had “additional NEMI interests” in two of the wells and those interests did involve “deductions”.
As usual, this answer was appreciated, but birthed a dozen more questions.
In short, we now have interest in thirteen different wells. On two of those wells we receive “PPROD” or NGL’s, and also incur “Owner Deductions”. Apparently due to NEMI interests that we were not able to negotiate and in fact, did not even know we owned.
On the remaining eleven wells, we do not experience much in the way of “Owner Deductions” (ie Post-Production Costs), but also, in a year of receiving royalties we have not been paid for any “PPROD” (Non-Gas Liquids) on those wells.
Which begs the next questions….When you negotiate a “gross-proceeds” contract that eliminates post production costs, does that also then remove you from participating in the valuable NGL’s that are part of the post production process? Those products are as valuable as the gas.
If so, then we really screwed up, or there is a mistake in our royalty payments.
Several thoughts.
The NEMI interests are royalty only, not able to negotiate leases or modifications to leases. Evidently an ancestor, whoever originally owned the land and minerals, passed on the executive rights (negotiating leases etc) to the buyer of the surface and part of the minerals, and retained a royalty interest in a portion of the minerals. As you said, this is subject to whatever the other party negotiates. I believe that, for an unleased property, when leased, the NEMI owner gets at least a 1/8 royalty, on whatever amount owned.
The WV laws have changed over the years, and unleased and leased properties might get put in a unit. Depending on when the well permit was approved, the terms might differ. There was a change in the 1980s to require old leases which paid a flat rate (maybe $200 a year per gas well, and 1/8 royalty on oil) to change the payment for gas, for any new well permitted after that law went into effect, to a 1/8 royalty, along with the 1/8 oil royalty. The companies started charging post production costs sometime around 2015 or so. Then around 2018 a new law was passed changing the payment for new wells on a flat rate lease to not be able to charge any post production costs on such leases.
I think, about the NGLs, this would depend on the wording of the lease. Since the recent forced pooling (cotenancy) law was passed giving people who did not sign a lease, or sign a modification to allow pooling, the right to a no-deductions payment and maybe (I would need to look at the law again) the right to choose either a gas only paid on the BTU value, no deductions, or a NGL included paid on the price of NGL but with some kind of deduction. As I understand it, which of those is the best choice is based on the type of geology in that specific area. Some places produce mostly dry gas and some produce a higher BTU gas which gives more value to the NGLs.
That is a summary of my understanding of it, such as it is.