Excessive deductions from royalties - SOGO

I receive royalties from about 12 companies and there is 1 company that is deducting 48% from the royalties. I questioned this and was told this

"I looked at your distribution history and see that yes, the deductions as compared to the revenue are high. This is due to the fall in oil and gas and gas liquids falling so much over the last couple of years. When Pioneer had these properties the oil and liquids price were more than double what we are getting now. The deduction for gas processing does not go down as the price goes down and therefore the deduction becomes a greater percentage of revenue. These are all costs that are charged by the purchaser of our gas and not something that we as an operator retain."

As mentioned, I all my other companies deduct between 10% and 28%.

Can someone tell me what entity would regulate this situation? I think this is somewhat fishy and would like it reviewed by a higher authority.

Thanks for any info!

It is a question of your lease terms. If your lease does not prevent deduction of these costs, then they can be charged. There is no state agency in Texas which has any authority or responsibility. You could ask for detailed breakdown of the charges and for evidence of payments.

Thank you for the information. I now see why there are so many issues and overcharging if there is no entity that audits the companies. This property has been in my family for years and years and was originally a Pioneer lease and SOGO bought that out, so of course I don't have the original lease agreement. I will, however, see if I can get a copy from SOGO (I'm sure they will get right on that. . .right?)

I appreciate the education you provided.

Thanks again and have a great day.

All of this can be audited; however, if your royalty % is small, the audit cost would exceed the benefit. A great lease is always your best bet; however, many oil companies just ignore the lease terms. Hope that helps. Malone Petroleum Consulting


Go to the Co Clerk office and they should be able to help you find the original lease since you know the name of the family member and hopefully the legals

Again, this is a lesson learned the hard way. Pay a good oil & gas attorney to help you lease. I hope you can get it audited. If it was me, it won't matter what it cost, I would find out what is really taking place. Sounds like the oil company is pulling a fast one.