Oil & Gas Production Date or Month
Prior to receiving you royalty payments, you will be asked to sign a Division Order which sets out your interest in production. Your royalty checks will arrive 2-3 months after production begins, as there is a tremendous amount of accounting and production sales information that require delayed payments. After you receive your first payment, you will then receive them monthly.
Oil & Gas Well Identification Information
Your royalty statement will identify the name of the well in addition to other information such as the API number. API stands for the American Petroleum Institute and is a unique, permanent number assigned to each oil and gas well drilled in the United States.
Production Type
So that you know exactly what product you are being paid for, this column will identify the type of production being sold. If the product is not spelled out, such as crude oil, natural gas, natural gas liquid, etc., then there will be a code which will be identified in the legend at the bottom of the last page.
Volume
The amount of production is generally measured in either barrels for liquids, or MCF for natural gas. MCF is an abbreviation derived from the Roman numeral M (for one thousand). Add it to CF (cubic feet) to get MCF.
Price
Each product is priced differently and product prices can fluctuate monthly. Some products are sold immediately at the wellhead. Other products may be sold weeks later to midstream companies at a metered location away from the well.
Deductions
Most of the royalty statement questions we get are related to deductions. Many oil and gas mineral owners wonder why their royalty check is not as big as they expected. The four most common deductions are for:
Transportation, Compression, Gathering and Processing
Unless you specifically negotiated otherwise, your royalty payment will be reduced as a result of costs incurred by the operator in marketing your production. Basically, these are necessary expenses associated with taking the production from the well, cleaning it up so it can be sold and then transporting it to the buyer. The legend at the end of the statement will be helpful.
Taxes
Yes, that dreaded word. As a royalty owner, you will be subject to severance taxes as well as any other taxes created by the state where the well is located.
Owner Interest
This represents your ownership interest in the production. This should be the same number shown in the Division Order you signed and is expressed as a decimal interest and carried out to the eighth decimal place.
Net Value
Also known as the amount you are being paid. It is calculated as follows:
Volume X Price – Deductions – Taxes X Owner Interest = Your Royalty Payment. Whether you are a mineral owner receiving royalty checks or just wanting to know what your minerals are worth, LandGate knows what they are worth and can market your minerals to get you the most money. At LandGate, we want to make you an informed oil and gas mineral and royalty owner.
