I own lease acreage in Reeves County (Block 13, Sec. 270–271). Permian Resources is commingling production from my lease with other leases/facilities. I’m trying to understand the practical and financial impacts for royalty owners.
Specific questions:
• Will commingling change how my oil, gas, and NGLs are measured and allocated to my lease?
• What problems should I watch for on RRC reports or in my royalty checks?
• What documentation or tests should I request from the operator (e.g., allocation methodology, well tests, meter run tickets, division orders)?
• If allocations appear incorrect, what are reasonable next steps for a royalty owner?
Any experience dealing with Permian Resources or commingling in the Delaware Basin (Reeves Co.) would be much appreciated.
It is a positive in my opinion. Permian has become a major player in the Delaware Basin with multiple acquisitions. They have the finances and gravitas to get good drilling and contractor agreements and pursue new drilling as appropriate in the multiple Hz benches in the basin.
Much better situation than what one would have in dealing some of the previous operators (e.g. OXY). And definitely much better than having one’s acreage being operated by a smaller operator who cannot compete with Permian and its capabilities.
There can be problems with properly accounting for production in some instances. Many companies are measuring the commingled gas and oil at the common point, rather than at the well. The production is then supposed to be allocated back among all the various wells based on periodic well testing. However, this is not necessarily happening, even with some very large companies. You should watch the RRC reports as some companies are reporting all the gas under a few wells and no gas under other wells. From the company view, all gas is accounted for and taxes are paid. From the royalty owner view, their gas may be under-reported and therefore the royalties are not being paid properly.
To original question, IMO it should not affect you at all. It just means they are putting fluids from multiple ownerships/leases in the same surface facilities (fluids are commingling) prior to sales. Which, sure, requires them to accurately measure the fluids coming from each well or lease so when they sell it they know who gets what. Which they will try to do, and chances are they will get it right, and if they get it a little bit wrong there is as good of a chance that it helps you as hurts you. That’s my $0.02.
Comingling gas flow and then allocating out the residue gas and NGL’s is the norm. Hundreds of wells go into any one processing plant. Don’t be surprised to see some small adjustments months after receiving your initial revenues for any well.
Commingling in this sense is mixing it BEFORE the sales point, custody point, whatever. Everybody has to stack hands and agree that the operator can sell the combined fluids so nobody is suing anybody over how many molecules belong to whom. Yes, gas from many wells goes to a gas plant, but that occurs AFTER the custody transfer. So nobody cares whose gas is whose, it’s already been measured in a way in which the operator and gatherer agree and all of the gas belongs to the gas plant at that point. Subtle difference as yeah, you have to do some allocation/composition math to allocate NGLs, but nobody is getting contacted for their approval to commingle their gas at a gas plant.
I am Young 13-0-270-271 D 11H (API 4238939316) COVERING THE WESTERN -MOST 480.89 ACRES OF SECTIONS 270 & 271 BLOCK 13, H&GN RR CO SURVEY, REEVES COUNTY, TEXAS (YOUNG 270-271 WEST UNIT)
I HAD OXY OPERATION UNTIL JANUARY 25 THEN PERMIAN TOOK OVER. DID THAT HAPPEN TO YOU? MY ROYALTIES WENT DOWN THE TUBES TO SOMETIMES NOTHING. I HAD GOTTEN A LETTER FROM PERMIAN PETROLEUM TELLUNG ME THAT THEY ARE FILING FOR COMMINGLING. SO THIS ON TOP THAT I AM WORRIED.
Permian Resources acquired a large chuck of older OXY operated wells in late 2024. Many of these OXY wells were in the latter stages of production. I have seen another set of wells that Permian ha taken over also have lower revenues than before (when OXY had them). The co-mingling effort may be the best move for these older wells. It is also possible that Permian Resources is tweaking field operations as well as the gas processing plants / contracts that are tied to these older wells.
One should note, however, that Permian did not pick up this OXY production for what is presently being produced. Their long game is to drill new wells / laterals into different benches once the economics make this more viable. There is no rush to do this since the older production has all these untapped benches HBP at present