Our wells used to be leased to Rosetta Energy, but they sold to Noble energy. When they did, our royalty checks plummeted. Anyone else have a similar experience or know why this happened?
Do you keep your Royalty Check Stubs? You definitely should, if you have give the check stubs from Noble close study and compare them to the stubs from Rosetta Energy.
I have been experiencing somewhat the same thing with a Major Independent and have found reductions in our royalties due to take away pipeline charges that the producing company is deducting from our royalty! This is new to us and our lease agreement purposely exempts any charges for production treating, and pipeline transportation charges to the producing company. We are currently taking care of that problem now. However, I have been doing quite a bit of research on this and have discovered that it happening everywhere now. Most lease agreements earlier than 1985 do not ever cover this issue, but if the lease agreement is an old one . . . . pre 1990 +/- it was implicit in the lease that the royalty was based on the price of oil at Cushing and the yardstick was “Production At the Wellhead”!
I personally believe that there is an opportunity for many mineral rights owners to join together and file a “Class Action Law Suit” against the companies that have started this practice.
My best regards,
Hello Mr. Watkins,
Thank you for this reply! At least now we know what to look for.
Many thanks, Cynthia Elm
There have been several recent Texas Supreme Court rulings on the interpretation of royalty provisions in leases. If the lease references value at the well or market value at the well, then post-production costs can be deducted from the sales revenues, including gathering, transportation, processing and marketing. This applies even if the lease later state that no post-production costs can be charged. Texas courts have ruled that the value at the well is by definition the sales revenues at the sale point less post-production costs from the well to the pint of sale. These recent rulings have spurred operators into charging these costs for current production and retroactively apply to prior years. I have never seen any court ruling or other discussions which have tied Texas oil values to Cushing prices. There have been references to WTI prices, but those can vary between purchasers. West Texas gas was sold historically sold to the pipeline companies at the well. It is now transported to processing plants and sold there, not in Oklahoma. The pipeline companies charge fees to get it to the plants after gas goes into the larger lines. More recently the oil companies have selling their pipeline systems and committing to long-term transportation agreements with escalating fees.