Royalty Owners liability related to past overpayments?

General Mineral Rights Discussion
1

I have seen several examples of oil and gas royalty owners having to repay past errors because of accounting errors. These errors were allegedly often discovered years later. In at least one instance, the operator acquired a company only to later find accounting errors that led to an overpayment.

liability fell to the royalty owners.

Is that always the case? Why isn’t the acquiring company responsible for haphazard due diligence?

Are there examples where an owner underpayment was discovered and corrected by the operator?

2

PPA (prior period adjustments) are common and frequently go back for several years. They are due to later determination that the volumes or sales were either over-reported or under-reported on the original checks. Or when the DOI is corrected. Usually the adjustments are small. You need to look at both the negative reversal and the positive adjustment for each month and for each product to see the net for the month. No one complains when the net result is positive.