could some one please explain why?
Thanks Jerry
Probably because production and sales are not the same
RRC records will show both monthly production and monthly disposition volumes. Your check should reflect the volumes sold. Sometimes a company will pay you on the royalty rate for your acreage instead of the royalty rate for total well acreage. Then the volumes will also be adjusted downwards. You need to know whether your royalty is based on all of the acreage in the well unit or if it based on your acreage alone.
Suppose you have all minerals in 40 acres at 1/5 royalty and the well is drilled on 80 acres. Your royalty rate on 40 acres is 1/5 = 0.200. But you do not own any of the other 40 acres in the unit. So your royalty rate on the 80 acres is 1/5 X 40 acres you own / 80 acres in well = 1/5 X 40/80 = 0.100. Most of the time you will be paid on the 0.100 royalty on 100% of volumes. So if 100 bbl are sold at $75, you would receive 100 bbl X $75 X 0.100 = $750.
If you are paid on the 0.200 royalty for your 40 acres (sometimes referred to as tract acreage), then you cannot be paid on 100 bbl at $75 because you would receive too much. So the oil company will allocate bbl to your 40 acres - in this case 40 acres / 80 acres = 1/2. So your check will show 1/2 of the volumes. Your check will show 50 bbl X $75 X 0.200 = $750.
Gas volumes can be different for another reason. Much gas is processed to separate out the ethane, butane, gasoline, propane and isoproane from the dry gas. Each of these components are sold. Some companies pay you based on 100% of the sales of the mcf and products in one line on your check. In this case, the mcf will be the well production. Other companies will report the gas and liquid products separately on your check. In that case, the mcf volume is less than the well production because it has "shrunk" from processing to remove the liquids.
Thank, You for your reply. I understand now
Good info, thanks!
Excellent!
There are other possibilities.
1.They are not required to pay you for lease use gas or loss/vent /flare gas. Review you leases.
2.They are paying you for Natural Gas and Products in Gallons. To verify the proper amount of products that are being sold you would need to get Chromatograph analysis for the gas for each well and determine the exact amount of products you are owed for.
3.You are just getting cheated as they will report to the RRC correct volumes or incorrect volumes. Then report to you correct or incorrect volumes and the same to the comptroller. It is 100% your responsibility to ensure proper payment is being made. You will not be able to go back further than the statute of limitations and any amounts underpaid or overpaid to you outside of the statute is their gain or loss(in very few cases). Another way they get you is hiding expenses in the price, double charging you for lease use and over charging you on severance taxes for exempt wells.
It is very complex when dealing with multiple wells, multiple operators and multiple leases.