Roan Resources not making payments?

Roan has drilled completed two wells in McClain County in early December 2018. These include the Duke 19 9n 4W and the Duke 24-13-9n-5. Since December, Roan has been selling oil and gas from these wells but to my knowledge has not provided any division orders or made any payments. I do not know about other wells.

From reading the June 30 10K for Roan, it is hard to see how they company will have sufficient cash to ever make payments to royalty owners. The company may have a little roam on its credit lines, but that was at June 30. Meanwhile the company continues to sell the oil and and gas and incur liabilities to the royalty owners while using the cash for other purposes.

I am interested whether Roan is paying anyone else and whether anyone has any suggestions as to how royalty owners can protect themselves in such situations. I understand regarding the 12% statutory interest and even the preferential claim in bankruptcy, but how long can a company operate when it appears they have not ability and no intent to pay the royalty.

The two wells were drilled from the same pad. Since there are three different sections to hunt down owners from, it may take a bit longer together the paperwork down for hundreds and hundreds of owners. A lot of companies are running behind right now. The proper thing to do is send a certified return receipt letter to the Division Order Department requesting a Division Order and asking for the statutory interest. (Keep a copy and the return green card) You will only get paid on the well(s) that have perforations in your section. They are obligated by statute to pay.

Appreciate the comment but I think you missed my point. In looking at Roan’s June 30 10Q it is clear that the company is very ill liquid. The do have some room on their credit lines but not much and they have significant accrued liabilities which are likely growing. It appears to me that Roan may view using royalty due to owners as a cheaper and more available source of financing than what may otherwise be available. A 12% statutory penalty will not compensate royalty owners for this risk and that penalty may or not be collectible in a bankruptcy. We will know more after the company files its Sept. 30 10Q, probably early November but I wouldn’t count on seeing anything from Roan for sometime. Hope I am wrong and it is just timing issue as you have suggested.

Tom- I don’t believe the ‘royalty share’ of production is reflected anywhere in the 10K. It won’t be listed as a liability nor an asset because it is not their money in the first place. To do so would more than likely be criminal and against SEC regulations. Commingling of funds would put them in more than just hot water. You will need to request the statutory interest in writing or they won’t pay it.

Todd, Thanks for your comments. I dont claim to be an expert on oil and gas accounting but obligations to royalty owners must show up on a company’s financial statement as a liability. Your statement would suggest that the the operators have some duty to hold royalty payments in trust and not on their balance sheet. While I agree that is how it should be, I dont think that is what happens. Revenue numbers are simply price time quantity. A portion of that revenue is then due to royalty owners and should be reflected on the balance sheet.

Roan drilled the Commando 12-13-5-4 wells -1WXH and --2MXH at the turn of the year, with first sales of production reported as being in March of this year. My understanding is that they are required to start paying royalties to mineral rights owners within 180 days, so first payments should be due this month. There are (according to an attorney friend) some statutory exceptions that can delay SOME payments, though I did not get an explanation. We will see whether or what is paid shortly.

You did not state the first sale month, when was that first sale? Is this the month reported on the OTC PUN search site? (I haven’t checked yet.) Is there Dawes Commission allotment involved? If you go to the Roan Website, there is an owner contact email address, so you might try asking them.

First sale on the two Duke wells was December 2018. We have asked Roan. The person in the area responsible for title work said it was completed months ago. The Division Order department claims the title work is still in process.

Again, my point is that the Roan doesn’t seem to have the cash available. The cost of using royalty payments as a source of financing is probably less than alternative sources.

I am not familiar with the Dawes Commission. I will research and see what I can find.

I have been getting paid regularly on the Roan Skaggs Farms well in Grady county, and just received an intitial payment for production on Roan’s Victory Slide, also in Grady County. I HAVE NOT, however, received interest payments on the Victory Slide although I have requested same twice in writing.

Dawes Commission allotments were allotments to members of tribes whose lands were distributed to their enrolled members under the provisions of the Dawes Act. If still held by a person who received an allotment, or an heir, the Bureau of Indian Affairs may be involved in determining quite a few matters regarding the allotment property thanks to some recent revisions to the governing laws. I have recently been discovering just how screwed up this can make things. The BIA is not the most transparent or efficient of Federal agencies.

Tom: I understand your concern, but again, the payments due royalty owners are not a part of the company’s liabilities or assets and are not a part of the balance sheet. It is not their money/asset/liability so it is not represented anywhere on a balance sheet. I don’t understand your “revenue numbers are simply a price time quantity” comment. The revenue numbers on the 10K represent only Roan’s net revenue interest, not 100% of the well(s) revenue stream. The royalty owners share are not represented.

You will have to ask a lawyer what this means, but the statute says: “All proceeds from the sale of production shall be regarded as separate and distinct from all other funds of any person receiving or holding the same until such time as such proceeds are paid to the owners legally entitled thereto. Any person holding revenue or proceeds from the sale of production shall hold such revenue or proceeds for the benefit of the owners legally entitled thereto. Nothing in this subsection shall create an express trust.”

That said, if a company is willing to violate the statute, it is likely the will lie on their 10K.

Tom I’ve run into a problem in Grady county Sect 12 & 1 9N 6W with Roan.

I got an email from them after having to email and ask where my royalty check was and got this response,

“The account is negative $ (they gave the amount). This is why a check was not issued for August. This was due to the Langston well previously being overpaid. Corrections were made in August. Once the account is positive again, a check will be issued”

I responded back with, I want a better explanation then that and in detail. I have yet to get a response.

When Roan proposed the drilling of the well, did you receive a letter offering cash for part of the royalties or the option to “participate”? (I have heard of an instance where an older well being re-worked/maintained/fracked involved a similar letter, but cannot verify it.) If you opted to participate, you may not have realized that you were on the hook for part of the expense of drilling and completion corresponding to your share of the overall mineral rights and thus your share of participation. It is thus possible that you were paid royalties that Roan is treating as due to Roan in payment for your share of participation. Personally? I’d press Roan and also talk to an oil and gas attorney, if I were in your shoes. I am doing the latter for other reasons now, in no small part due to BIA issues, but this can speed things up considerably. It is a matter of cost-benefit ratio in any case, though.

In case others may have missed the press release, Roan is being sold to Citizen Energy. Roan’s debt situation and preparations for the merger may explain at least some of the issues people have been experiencing with Roan. Here is a link to the press release.