The production company wants our family to pay the cost of making the oil and gas more valuable. What does this include and should we ask the production company to share: 13/16 and our 3/16? Thanks in advance for all the valuable advise I know we will be getting from other participants in the forum!
Helen,
Check your lease. If payment is at the well-head value or published market price, the payment is straight forward. If not, you gave the production company the right to enhance the value that they could sell the product for and deduct you share of the cost of doing so. Things that enhance value include, transportation to a rail facility, gathering lines from multiple wells, compression and cleaning of gas so it can go into a pipeline, or in summary anything the producer thinks is necessary to maximize the amount it receives from an arms length buyer.
Thank you for your answer. The company is trying to get us to pay for the "enhancement in full" for the benefit of us all. We are 3/16 and they are 13/16. Sounds great for them but not us! Thanks again
Gary L. Hutchinson said:
Helen,
Check your lease. If payment is at the well-head value or published market price, the payment is straight forward. If not, you gave the production company the right to enhance the value that they could sell the product for and deduct you share of the cost of doing so. Things that enhance value include, transportation to a rail facility, gathering lines from multiple wells, compression and cleaning of gas so it can go into a pipeline, or in summary anything the producer thinks is necessary to maximize the amount it receives from an arms length buyer.
Gary L Hutchinson
Minerals Management