My two siblings have mineral rights in 8 wells in Williams County and MacKenzie County. We chose to participate in our first well, Holmes 5601 44-32H, but all subsequent wells we have chosen not to participate due to the large moneys we would have had to come up with to participate. The first well we chose not to participate is Harbour 5501 13-4H, which was spudded on 12/13/11 and had first production in 3/12. The total production through 6/14 is 158,395. Our election letter not to participate was on 1-21-13.
I called a landman in January 2014 asking to see where this well was at regarding costs recovered as we were force pooled for 150% penalty. She sent me out of Payout Statement that my siblings and I could not decipher at all. The costs of this well initially was approximately $10,645,780.00, per AFE supplement sent to us. We should be getting close to increasing our revenue shares from 16% to 80+%, but have no way of knowing this.
Is there a better way to ascertain this information than trying to decipher the Payout Statement, which included leasing expenses, developmental expenses. No one at Oasis answers email and I cannot seem to get a landman on the phone when I call. \
Pat, the payout statement is what you have to go by until you feel you need to audit the operator. If they are overcharging you, they are not going to admit it just because you call them.
The payout statement should at least have a number that they are claiming is the actual cost of the well. The well must recover the actual cost of drilling and completing 100% plus a 50% of actual cost of drilling and completing penalty, not a 150% penalty.
Then there is operating expenses. Some wells are laughably cheap to operate and others cost more, like for salt water disposal if your well is water heavy and there is not a disposal well on site.
If I could see your payout statement possibly I could make heads and tails out of it. There should be at least three unambiguous numbers 1. being money made to date and 2. being how much the well has cost to a specific date in time for drilling, completing and operations and 3. there should be a total still owed, if not I'm sure you can find a calculator.
You should have a snapshot in time, probably a couple months out of date and the numbers for operating expenses can move. I know I need to audit my operator but I don't want to do it too early and have them go back to business as usual the very next month, I want to catch as much as I possibly can. It is about time for me to contact the other non-operating interests and see if they want in on the audit in exchange for paying their proportionate share. I hope this helps.
Thank you for your response; I would gladly send you my info on this well if you could privately email me your address. Once we know how long it took this well to begin getting returns, we can then expect the other six to be similar. One question is the cost of drilling the well makes sense, but the continued expenses the well incurs should not be our responsibility if we are non-participating. The additional 50% penalty would include what? Thank you for your help.
Pat, the payout statement is what you have to go by until you feel you need to audit the operator. If they are overcharging you, they are not going to admit it just because you call them.
The payout statement should at least have a number that they are claiming is the actual cost of the well. The well must recover the actual cost of drilling and completing 100% plus a 50% of actual cost of drilling and completing penalty, not a 150% penalty.
Then there is operating expenses. Some wells are laughably cheap to operate and others cost more, like for salt water disposal if your well is water heavy and there is not a disposal well on site.
If I could see your payout statement possibly I could make heads and tails out of it. There should be at least three unambiguous numbers 1. being money made to date and 2. being how much the well has cost to a specific date in time for drilling, completing and operations and 3. there should be a total still owed, if not I'm sure you can find a calculator.
You should have a snapshot in time, probably a couple months out of date and the numbers for operating expenses can move. I know I need to audit my operator but I don't want to do it too early and have them go back to business as usual the very next month, I want to catch as much as I possibly can. It is about time for me to contact the other non-operating interests and see if they want in on the audit in exchange for paying their proportionate share. I hope this helps.
I am interested to know the answer to this…..I believe you would still be responsible for addition expenses incurred. I know when you participate in the wells, you have your initial cash call but also you have jibs for the ongoing work of the well which is expenses that are billed out to those that participated….. but don't take my word. I am still learning this beast of info.
Pat, I sent you a friend request. Of course you are responsible for surface equipment costs and operating expenses according to your proportionate share but those costs should not come out of your 16% statutory royalty.
A well does not need a gathering line to be complete and the law says actual cost of drilling and completing the well is what the 50% risk penalty is based on. Then too, if the well is a flop, there is not going to be a gathering line, the operator will get a waiver from the state and flare all gas. You still owe dollar for dollar for surface equipment but it should only come from the 84%, not your statutory royalty.
OK..how do I get into the friend account. I would like to fax you the information I do have on this well; it has been producing about 3,500 to 4,000 barrels per month through May 2014. Would it be OK to fax my info? You have helped me in the past and certainly appreciate your expertise.
Pat Maloney
r w kennedy said:
Pat, I sent you a friend request. Of course you are responsible for surface equipment costs and operating expenses according to your proportionate share but those costs should not come out of your 16% statutory royalty.
A well does not need a gathering line to be complete and the law says actual cost of drilling and completing the well is what the 50% risk penalty is based on. Then too, if the well is a flop, there is not going to be a gathering line, the operator will get a waiver from the state and flare all gas. You still owe dollar for dollar for surface equipment but it should only come from the 84%, not your statutory royalty.
Pat, on the upper right of this page directly under your name should be your inbox, click on that should take you to your messages. It will say you have a friend request, click on that and accept then we can private message. I also included my e-mail in the brief friend request message. Glad to help if I can.