Does anyone know if the operator of a well has any sort of duty or obligation to notify the non-op partners in its wells who are taking their gas in kind when ownership changes are submitted by mineral owners to the operator? My mom is in a situation where the operator says they won’t contact the non-ops on her behalf to let them know of the ownership change she submitted to the operator and are also not letting her know who the non-ops are that are taking in kind. Obviously she needs to let those non-ops know so they can change who they’re paying and to do that, she needs to know who they are…
In the alternative, is the Operator legally obligated by statute or in any other way to provide a mineral owner with who the non-op partners are when requested so she can submit her ownership change to them as well?
This is in Texas and to clarify a bit, this is not a situation where there were multiple lessees/multiple tracts in a unit/an allocation well or anything like that. It’s a single old lease on one tract with simple old lease wells on it where that one lease has apparently come to be owned by multiple undivided WI owners. We just don’t know who the undivided non-op WI owners are alongside the operator and there was no requirement in the old lease for the original lessee to inform her when the lease was partially assigned.
This is a little confusing. If your mother being paid only by the operator for all production, then this should not change. This is the most common situation as most non-op owners instruct either the operator or purchaser to pay the royalty owners. If your mother is being paid directly by some non-op owners, then she can contact them directly. If your mother is only being paid on a portion of the production by the operator and is not being paid in full, then that is a situation that you need to address. It may require tracing the lease assignments to determine what companies own a portion of her lease.
My understanding from Clay’s post is that there are at least two working interest owners (the operator and at least one non-operator) that each take their share of production and they separately market the sale of gas, and each pay royalty to his mother, While the operator and the non-operator have a joint operating agreement to agree to the rights and obligations, the royalty owner would not be a party to that agreement. While the operator should be cooperative, and probably has an obligation under the JOA to do so, Mom can do a title search with the Clerk’s office to see who the non-operator(s) are and contact them which is what TennisDaze suggests.
Yeah sorry, I can see how I was a bit confusing. She’s been conveyed the interests by a family member and is trying to get everything transferred over to her. Originally, we thought the operator was paying 100% of the royalty on production because the decimals on the division order from the operator reflected that. She receive a check from the operator but the revenue was being paid at lower decimals than the division order showed, so we inquired why that was. That’s when the operator let us know that they have non-op partners taking production in kind, but that they weren’t interested in telling us who the non-op partners are or what percentages they own. We can guess the percentages by comparing the payment decimals against the division order decimals, but don’t know who the non-op partners are. The family member that conveyed these minerals to her has a ton of properties all over the place and he doesn’t have a clue what’s what so we tried sifting through all of the past payment details we could find looking for the non-ops that should’ve been paying on this stuff but had no luck. This is also really old production in a long-forgotten area… the kind where un-filed assignments are more numerous than the sporadic filed assignments and checks may come once a year depending on minimum distribution. I was hoping the operator would have some sort of duty as operator to inform the non-ops and we could point to some statute or something to just make them be a little more cooperative since they clearly have to at least know who the non-op entities are. I think this is one of those “companies” that some wealthy guy inherited from a previous generation that was actually in the oil business, where the whole outfit is run by a consultant accountant because the actual owner doesn’t know anything about oil and gas. There’s probably a bankers box or two of ancient records in the owner’s garage that he’ll never open and wouldn’t know what any of the paperwork was inside of it if he ever did. Thank y’all for replying, I appreciate it. This stuff would have to be governed by some variation of a 610 or earlier JOA so I’ll look for a generic one and see if there’s any language in there I can try to use to hold their feet to the fire.
Some companies, such as XTO, will pay on a lower distribution decimal, but then adjust the volumes and sales upward so that the net royalties are paid in full. To determine this, you need to look at the sales revenues reported to TX CONG and compare to your check detail. For simplicity, the DOI is 0.1000 and the disribution decimal is 0.0900. Total Oil BBL sold is 100 and Total Sales revenues are $1,000. If paid normally, Volume is 100 X 0.100 = 10 net and Sales are $1,000 X 0.100 = $100 net. Now the company pays a distribution decimal of 0.0900. On Sales of $1,000 X 0.900 = $90 net which would be underpaid. But the oil company adjusts the sales upwards to compensate for lower DOI and reports gross sales $1,111.11 on the check and $1,111.11 X 0.900 = $100 net. If you are being underpaid, you may need to send a formal demand letter to the operator or have your attorney intervene.
Txo , really hard to deal with, I been dealing with them for 2 years now, some luck , I found a lawyer so I don’t have to think about it! Just my 2 cents! Good luck and welcome to the form
I’m familiar with other operators grossing up like that in their check detail, but I hadn’t thought to check against the lease drop data so I appreciate it. I just did and unfortunately in this situation the operator isn’t grossing up volumes. I had wanted to avoid it because of the low return on investment considering the volumes we’re talking about, but it sounds like using an attorney will be our only way to force them into action. Maybe the threat of having our attorney contact them alone will do it, but that hasn’t worked all that well in the past for other things. Anyways, thank y’all again for the responses.