I have a small oil & gas interest in Dimmit County, Texas with Chesapeake Oil. I was fully expecting the royalty check to drop below $1,500 but this month it. Jumped to almost $6,000. After reviewing the detailed statement, I see revenues and expenses dating back to January, 2019.
Typically the monthly payment is for production 90 days ago. I have received no correspondence from Chesapeake regarding any accounting errors they may have had last year. Has anyone else experienced this? Any suggestions? Given that I believe these companies are required to pay royalties within 90 days, shouldn’t there be a penalty or interest paid if they had an error over a year ago? Or what happens if there was an error in calculating revenues for this month?
Are these payments for adjustments for revenues original well or for one or more new wells that began producing during 2019? Does your lease contain a provision regarding interest or penalties for late payments? If you post the well or unit names, someone may be able to give you a more specific response.
If these are wells that you were already being paid on, then one of the options is that they did an audit and found that the decimal interest was wrong, or the revenue had been accrued incorrectly. Quite often there are adjustments in the gas numbers. Call Chesapeake and see it they will tell you. Audits are common. Probably won’t see any interest payments, but you can always ask for them by certified mail return receipt and see what happens. If these are new wells, then that is also an explanation. Check your decimal interest and well names on an older check versus the newer one.
Thank you. It did occur to me that they were likely correcting for an error but I assumed that if this was the case that I would get some kind of communication explaining the error. We get very little communication but will just give them a call. I don’t really care about the interest, but if there is a law that stipulates when payments need to be made, you would think there would be penalties for non-compliance? Has anyone heard of a case where a lease holder has been over paid and had to write a check for that error?
It looks like there were three new wells that came online January 2019, correct? Is it possible one of the below situations happened with the new wells? Especially since they are extended reach laterals crossing multiple sections. I’m not a landman or a lawyer, but wells that cross section lines are great at causing accounting headaches
SUSPENDING PAYMENTS - Sections 91.402(b) and 91.402 (f)
Payments may be withheld without interest beyond the time limits set out as noted previously (provided your lease does not provide otherwise) when:
A dispute concerning the title that would affect distribution of payments
A reasonable doubt exists that you have sold or authorized the sale of your share of the oil or gas
A reasonable doubt exists that you have clear title to the interest in the proceeds of production
A requirement in the title opinion that places in issue the title, your identity, or your whereabouts which has not been satisfied after a reasonable request for this information has been made by the operator.
Payments have not yet reached $100 (see When You Should Expect Payment above)
Same thing happened for me and my siblings for Dimmit County and Chesapeake . Like you, we were expecting a significant drop, but the increase was nice. We may actually be in close proximity because we had 5 new wells come on line in January 2019.
Andy, this has nothing to do with your question, but I think it’s an interesting story.
In 1953, my grandfather loaned a man $500. After about a year this fellow told my grandfather that he couldn’t pay him back but would give him a small mineral interest in Dimmit County.
My grandfather died in 1978, but always joked about his ship coming in one day from that interest. He never saw a dime from that interest and it wasn’t until 2010 that my parents started receiving some good payments. My Dad, who was a District Judge in South Texas passed away in January 2019 at age 97. During the interim between January and June when the mineral rights were transferred from him to me and my siblings, the well count went from 2 to 7. It is not retirement money, but it is a wonderful supplement for all of us.
I hope that my grandfather is looking down and smiling knowing that what he did in 1953 has benefitted his family in 2020.
Thanks for sharing Tom. My story is a similar one. My grandfather was a lawyer and judge in southern Illinois. The story I was told is that his small interest (about 15 acres in Dimmit County) was bartered in exchange for legal fees for an acquaintance buying property in Texas. After both my grandparents were gone, the interest was transferred to my Aunt and Dad. My Mom was dying of Ovarian cancer and my Dad was about 90 when we were approached about pooling lands for oil and gas. I inherited this interest after my Dad’s death but the royalties helped Dad with long term care costs. Last year, after many years of significant royalties, production had dwindled to a few hundred dollars. It never occurred to me that horizontal wells were a possibility, but we have been pleasantly surprised. My Aunt is still living and has often had the same observation you had. A decision my Papaw made made many years ago was still supporting his family. Of course the production from these wells is also dwindling and prices have bottomed. For me, it’s “found money” that has been helpful in retirement. I have also learned a lot during this whole process.
I love hearing the stories behind minerals! I recently ran across a guy (one of our neighbors) who’s grandma is receiving payments in Lavaca county from some acreage her parents purchased to build a church in 1913 and then a house in 1918, and is now the site of a museum (the only black cultural institution in the county). It wasn’t until 2013 that the minerals started producing!
