There has been quite a bit of discussion over the last year or so about how far behind EOG is on division orders. In my case, they are STILL not paying on the Nighthawk wells that went on production two years ago. Their standard response, if you can get hold of them, is “be patient, DO’s are coming.” I was last told that on Feb 12, 2020. With the current downturn in the business, I am getting more and more concerned that companies may start using suspended royalty proceeds to cover operating expenses caused by revenue shortfalls. By my calculations, EOG must have north of $20 mil suspended on the Nighthawk wells in royalties and interest. Far as I understand, this money is not in an account that the company COULD NOT get its hands on if it really wanted. I also understand that the only way to force the issue would be to file suit in district court. Comments
Send them a certified letter requesting payment w/statutory interest.
While sending a letter is good practice, it’s not going to speed anything up. They’re so far “behind”. It’s an absolute joke. Especially for working interest owners. Day late paying well costs? The fact that they get away with it (along with other operators) is disgusting. Oh you don’t have your title opinion finished? Shouldn’t have been able to drill…
Royalty owners need to team up and start suing. Something needs to change. If anyone has advise on how to go about that, I’m all ears.
You don’t like 12% interest?
We LOVE 12% interest - if it ever gets paid. The principals in the LLC which I represent are in their 70’s and may never live to see the $thousands already owed them by EOG if this isn’t resolved sometime soon. And as I mentioned in the original post, I don’t see anything in the statutes that says EOG can’t dip into royalty suspense funds to cover its own expenses during this downturn. Even a company the size of EOG can’t survive $20 oil forever. Oh sure, royalty owners could sue them, but how long is that going to take? Time IS OF THE ESSENCE to many older royalty owners.
They have made it this long what’s a little more time? Prudent parties don’t spend what they done yet have. But I understand. FYI, in Oklahoma the royalty share is not commingled with operating revenue so the funds are safe from any financial defaults of the operator. Patience is a virtue in the oil patch.
Just received 2 Division orders yesterday. I know these EOG wells have been in production for some time. OK with it as long as we get our suspense plus 12%. Don’t know how to vet them to make sure we are getting our interests…
Plenty of people could have used the money owed and made much more than 12%.
And made much more? Hindsight never made a dime.
WSD- To get the interest, send them a certified letter requesting the same. Interest will show up on the revenue check as it’s own entry.
Were these DO’s for the Nighthawk wells? 1 thru 4 or just the #1?
Actually, the Production Revenue Standards Act does say the the oil companies cannot use royalty owner money for anything other than to pay royalties. In Oklahoma, there is no legal requirement that a D.O. Be signed before you can get paid. Ask the company if your title is clear and if there is no problem concerning your interest there should be no reason they can’t release your payment. Also, that 12% interest is compounded annually and owed back to the date of the sale of the production.
That’s 12 % compounding interest.
Compounded annually just like Ms. Darnell stated. 12% if clear title, considerably less if title has defects.
The interest rate is 6% on late royalty payments if the title is unmarketable.
I don’t always agree that patience is a virtue in the oil patch. I would much rather have my money in my bank account than any oil company’s. Don’t you remember that when Semcrude filed bankruptcy in 2008 practically no interest owners who had revenue in suspense at Semcrude got a penny of it? None that I heard of anyway.
Ms. Darnell: The law was changed in 2018 for interests with title defects. Now based on some interest rate as determined on wall street or some such garbage. Less than 5% now. Won’t be long before the under the table lawyers, oil companies hand over some cash to the politicians to get the 12% lowered.
Mr. Baker, in Oklahoma? I retired from OCC on 12/31/17 and wasn’t aware of the change. I’ll look it up. The oil companies have been trying to get the interest rates changed for years.
Yes, in Oklahoma. I can get you that tomorrow if you can’t find it.
The amount of interest is based upon the following updated rule:
D. 1. Except as otherwise provided in paragraph 2 of this subsection, where proceeds from the sale of oil or gas production or some portion of such proceeds are not paid prior to the end of the applicable time periods provided in this section, that portion not timely paid shall earn interest at the rate of twelve percent (12%) per annum to be compounded annually, calculated from the end of the month in which such production is sold until the day paid. 2. a. Where such proceeds are not paid because the title thereto is not marketable, such proceeds shall earn interest at the rate of (i) six percent (6%) per annum to be compounded annually for time periods prior to November 1, 2018, and (ii) the prime interest rate as reported in the Wall Street Journal for time periods on or after November 1, 2018, calculated from the end of the month in which such production was sold until such time as the title to such interest becomes marketable or the holder has received an acceptable affidavit of death and heirship in conformity with Section 67 of Title 16 of the Oklahoma Statutes, or as set forth in subparagraph b of this paragraph. Marketability of title shall be determined in accordance with the then current title examination standards of the Oklahoma Bar Association.
As a businessman Donna, your father was always a joy to deal with. His humor and drawing talent were well known.