I just got a statement for May from a mineral interest in Oklahoma. The normal two page statement was 22 pages. Full of charges and credits going back 4 years. This happened at the end of December also. I’ve experienced this on a well in Texas also, different company. My question is what and why are there so many corrections? And why does it always seem to be the same companies that have all these corrections? We get small checks from about 15 companies. These two companies are really overboard. I’m not an accountant and I haven’t dove into this 22 page statement yet but I would swear some of these corrections have been done on the same months twice. The absolute minimum a company should do is put a note in with your statement explaining why they are doing this.
HI Chuck.
Welcome to the painful world of prior-period adjustments (PPAs). An all too common occurrence in oil+ gas.
PPA’s occur because revenue must be dispersed before changes are settled in the operator’s books. They involve adjustments to income or expenses in the current year due to errors or changes in previous months’ books. Factors leading to PPA’s include changes in volumes, prices, ownership, and other reasons. While they are common, they are usually minor adjustments, although major issues can have a material impact. PPA’s are more common with gas due to processing and marketing factors.
There is a great episode in Matt Sand’s Mineral Rights Podcast that covers the topic in depth. It’s worth a listen, here’s the link: MRP 162: Understanding Prior Period Adjustments – The Mineral Rights Podcast
Hope you find this helpful - P
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