As a royalty owner I’m learning the importance of verifying my royalty statements for human error and sometimes for unscrupulous practices.
How do I verify the “actual” price shown on my royalty statements for my Oklahoma mineral interests (McClain County)?
From my current understanding, I can only access “actual” production (reported to the Oklahoma Tax Commission) but not “actual” price. Instead, I understand I can only compare my royalty statement to the “average” price for my area. I’m hoping there is more transparency for royalty owners than this!
For the “average” gas price, I found ‘Natural Gas Prices - Wellhead Price’ at (Natural Gas Wellhead Price). However, there is no data. I’m not even sure if “wellhead price” is where I should be looking.
In short- there is no way to verify prices, either oil or gas. Oil prices generally change by the day so prices are different for the day that a barrel is sold. Gas prices very based on contracts & a basket of percentages of various hub prices for the month.
Your best bet might be nicely asking (or pestering, if that’s more your thing ) the operator for support on their pricing. How you worded it to this forum would actually be a great way to word it to whoever operates your wells. It’s a fair question, in my opinion.
Also, it’s a pretty complicated process to follow the dollars from a drop of oil at the wellhead to a royalty owner’s check but important enough that most all companies are forced to go through multiple audits a year to prove that A+B=C. They may very well say “no”, they can’t supply that detailed of data, but they might see what they can do to help.
Whenever I was asked a question from a royalty owner I’d see what I could provide, even if I didn’t necessarily “have to” by the book. An upset or questioning royalty owner can cause massive headaches and hours lost in an operation (even if completely innocent of any unscrupulous practices!), and usually someone there is smart enough to realize that. Also, providing data would be an easy way to get “brownie points” in a time where the operator might be trying to ask favors of the mineral owners.
Even when I had ALL the data on the “inside” and cool business tools like Platts, following the bread crumbs to the penny was quite the task.
Each operator has their own contracts with the carriers, so they will most likely keep those confidential. Prices change daily if not hourly, so the price on your check stub is an average over the month. Oil may or may not be paid from the tank pickup. It is paid by its quality as well. Gas is very hard to pin down. Gas from the wellhead may contain many components, so once it gets to the gas plant, they are separated out and sold under their own type. Methane, ethane, propane, butane, iso-butane, etc. Condensate may be sold under a light oil price. The price amount you see on your stub is back calculated from a roll-up of all those different prices and is a monthly average. A good analogy is a dairy farm. The milk from one cow is sent to the dairy. The milk is converted into all different products-whole milk, skim milk, butter, cream, etc. and then sent to grocery stores all over. Practically impossible to trace the value of that one cow’s milk through the entire value chain and roll it back to the dairy farmer and back to that one cow. Some operators will sell their milk the day it is fresh from the cow. They would get one price on a bulk product. Some operators own their own dairy and processing plant, so they would calculate a different set of prices.
Thank you for your feedback! Though It seems I wasn’t clear.
When I said “actual” price, I meant the average price per well over the month - already calculated on our royalty statements, as opposed to a generic regional average. I’m not looking to conduct an audit. I’m only wanting a source similar to the OTC gross production database, so I can ensure my royalty statements match what is being reported to a regulatory agency, which I assume conducts audits.
However, I’m thinking the fact remains there is not a way to verify the price on our royalty statements like we can with production. Therefore, I’m disappointed that royalty owners don’t have a public source for verifying a critical part of our royalty statements, while still keeping competitive pricing information confidential. Would you please help me understand why this is???
Sorry for the confusion and I hope this is more clear!
P.S. By the way, without a public source currently, I will nicely ask EOG for supportive price information (maybe the price report submitted to the OTC for tax purposes?) and hope they will want to make this mineral owner happy. Thank you for the suggestion!
Sorry, there is no public place for verifying prices received by each operator for each well. The reason is because the prices are confidential. “Public” and “confidential” do not occupy the same space. The prices are confidential because of competition. You can get a general feel from the postings of several of the transmissions companies such as Plains or Sunoco. You can also look at the Investor reports of each operator and they give a general feel for the prices that they use for their calculations, but they are very general.
In Texas, the oil and gas sales and volumes are reported to Texas Comptroller for severance tax purposes and are publicly available on the Texas Comptroller CONG website. This is reported separately for each RRC Lease number for every month. If a completion report is not yet filed, then the operator has to report sales under the original well permit number because severance taxes are due for any oil and gas sales. A mineral owner can compare the sales reported to CONG to the sales reported on the voucher. This system is very useful. Maybe the National NARO and the State NARO could propose that Oklahoma and other states which charge severance taxes make this information publicly available.
That is an excellent idea! There may be a price list for OK by operator by well, but I haven’t found it yet. I looked on the OK tax site and couldn’t find anything comparable.
Thank you for the great idea! Any suggestions on the best way to go about proposing this to National NARO and State NARO? I became a member last month.
I am on the Boards of both of them. I will ask the other board members if they know of a site. We also have a contact with a knowledgeable lawyer who is legislative guru. Will see if he knows. Thanks for a really good question! Love it when our members think of something useful. I posted it over in the NARO category.
Thank you! I greatly appreciate your openness to this idea and your action to share it, while gathering more information so we may work toward improvements! How may I help? I want to be part of the solution.
I posted it on the NARO site today. There are about 50 very experienced mineral owners, lawyers, software folks, etc. that are on the two boards. If one of them knows something, then they will let us know. I will follow up with emails if they don’t answer here. We have quarterly meetings coming up, so can bring it up then as well.
Nothing… NARO has not met yet for me to bring it up. It would actually probably have to go through the legislature and the OTC really does not have the data (that I know of). They probably just get total amounts.
I asked your question at the US NARO board meeting today. Tina Bonner is the president of the OK NARO chapter and she said that yes, there is a way to get the information. Various people were quite interested in the topic and she may be writing an article for the ROAR in how to do that.
https://otcportal.tax.ok.gov/gpx/gp_displayPublicPUNListSearchDownload.php
Go to the tax site and put in your well name or hunt for it by section, township and range. Go to the Production History tab. There is a blue line there that says Request for Gross Production History Information. Click on it and it gives you a form that has the instructions for obtaining the information. She said you have to provide a copy of your Division Order. The instructions are there on what they need and what fees they charge. There is a phone number at the bottom of the document. Here is the link. Oklahoma Tax Commission - Obtaining Crude Oil and Natural Gas Production History Information. I only see that the amount of the tax would be given, not sure that it actually going to give the price of oil or gas at that particular time. But you could call the number and ask how to get it. Let me know if you get any progress.
) the operator for support on their pricing. How you worded it to this forum would actually be a great way to word it to whoever operates your wells. It’s a fair question, in my opinion.