Reading a royalty statement

My mother, her brother, their 2 cousins inherited mineral rights on 55 acres. My mother she passed, had me only, my uncle he passed, had 5 children, one cousin is still living, other cousin has 3 children she passed away. We all live out of state. Antero contacted us, sent us contracts. I had an attorney look mine over. Antero sent us our start up check. They started pumping in May 2021. Some of us got our first royalty check in November, others didn’t. Called Antero they said the paper work was late to their cut off date. However in December everyone received checks, plus the ones in November got theirs on the same check in December. Antero sends the emails with their checks stating what the pumped. My question on this is how on earth do you read and understand it. It says at the bottom Owner net deductions. What is this? Thanks in advance.

Owner deductions always include severance taxes, but also some (but not all) leases permit the operator to charge the royalty partners for some post-production processing costs. Oil & gas is treated at the wellhead to separate water & impurities, some leases require royalty owner to share such costs. We eliminated such shared costs in our lease negotiation.

Congratulations, this may become a fun hobby. What state is the well?

YouTube has multiple videos about royalty statements, avoid videos about music & book royalties. “Oil and Gas Royalty Statements” by Blue Mesa is a good start.

Royalty statements are difficult for beginners, you can Google search some of the product codes, or try contacting the operator, or ask on this board. Owner net deductions are your share of severance taxes for the state, both you and your operator pay severance taxes. Your taxable income at year end is the net amount paid to you, you don’t deduct severance taxes because operator paid them and paid you net not gross. You are allowed to claim a 15% depletion allowance on your tax return.

Sounds like a new well, new lease? I asked my operator and received their Division Order Title Opinion, which calculates every royalty percentage. First time royalties are sometimes late, operators are required to pay some late interest.

Our Wells are located in West Virginia, Tyler county. Thanks I need all the help I can get.

Generally, you read them from left to right. They should have the well name, month of production sales, product, gross amount in volume, price and then as you move to the right, your net amount, decimal interest and any deductions. If this is the first check, it is likely to have several months of pay. There should be a legend that explains all the abbreviations.

The National Association of Royalty Owners has several webinars available on how to read your statement, how to make sure you are not being shorted, why you might have corrections on statements, etc. The webinars are $25 for non members, but free for members. You can roll the $25 into a credit toward a membership. They have an Appalachian chapter which does townhalls, conventions, etc.

Be aware that Antero does not report producer deductions withheld from the royalty checks on the Form 1099-Misc you will receive for 2021.

Ok, do we have to show the deduction. This is all very new to us. We live in Arkansas, one in Texas. Wells are in West Virginia, so we can’t just pop in and see just what Antero is doing. If you send emails or phone says maybe up to 8 days before they get back with us on anything. So we are all in the dark on this stuff. Next question do we need to get an attorney in West Virginia to make sure we know what we are doing? Thanks

The deductions are deductible on your federal Schedule E. You are also required to file a WV non-resident tax return, the WV mineral royalties are taxable in WV.

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