We have royalty interest with Oxy. Did not received monthly check after October. I contacted them
and was sent this statement.
After our system conversion Oxy began a process of verifying ownership and royalty burdens in several units. During this review it was discovered that your oil royalty in the Seminole San Andreas Unit was being paid to you by both Oxy and XTO. Further, we discovered that Oxy and XTO’s division orders were out of alignment which resulted in you being paid by both companies for the same interest. Oxy has corrected the division orders and ran prior period adjustments to account for this error. As a result of these changes your account balance with Oxy has been moved into deficit status. Your account will remain in deficit until current revenues recoup these amounts. Once your account is in a payable status your payments will resume.
Is this common? How did this happen and why weren’t we notified?
Most likely the land department made mistakes they think. They may be trying to cover up their mistakes from their bosses. I would ask for more and better written detail. They need to tell you the amounts. I would not buy this!
It seems that Oxy is telling you that the total DOI royalty being paid by Oxy and XTO totaled to over 100% of the true royalty. In other words, Oxy and XTO are each paying part of your royalty. There are several questions. A generalized response is not acceptable and you are entitled to details. First, ask Oxy what is your total royalty decimal (DOI) in the unit? How is it being divided between Oxy and XTO? Be sure that you find out if the royalty decimal calculated on the entire unit or only on a tract basis. Alternatively, did each company pay 100% of the DOI, but only on its “share” of the unit volumes and sales? For example, if each company sold 50% of the oil and gas and paid you your total DOI on its half, then you would have been correctly paid. If each company sold 50% and XTO paid you on 1/2 of the sales and Oxy paid you on 100% of the sales then you would have been paid on 150% of the sales. Second, is XTO continuing to pay royalties on the original DOI or has the DOI been changed? Third, What is the claimed overpayment by Oxy? This will enable you to determine how quickly it will be paid off - 2 months or 2 years? Fourth, pull out your older check stubs and see if both companies were paying royalties on the same volumes and sales. This will be easier to track by entering some comparative data for select production months (e.g. January and July for the last 3 years). Did each company report 100% of the volumes and sales or only its portion of the volumes and sales? It will take time to work through the data and figure out what happened and whether or not Oxy is correct.