Video · 4 minutes · captions on
Why is my royalty check lower?
Transcript
Introduction
Your royalty check came in lower than last month. Before you worry, know that four things move a check, and only some are worth a call. Here is how to tell which one moved yours.
Four things move a check
A check is what the lease sold, times the price, times your share, less what comes off. So it can fall for four reasons. One: the lease sold less. Two: the price fell. Three: more came off. Four: your share changed.
One: the lease sold less
Every well declines. This is a real lease, Interstate 8-32 C in Midland County. Two years ago it sold forty thousand barrels a month. Now it sells thirteen and a half thousand. The state records what each lease sells every month, so this is the easiest cause to check.
Two: the price fell
Then the price. Oil follows the market, and the market moves every month. This is the West Texas Intermediate monthly average, from the U.S. Energy Information Administration. It rose to a hundred and two dollars in May, then fell to eighty-four in June. In July it fell another five percent. A stub price that follows it is normal.
Three: more came off
Texas takes a severance tax of four point six percent of oil and seven and a half percent of gas, so the tax rises and falls with the sale. Gas lines can also carry gathering, compression or processing fees. A fee that starts, or grows with no change of service, is worth a question.
Four: your share changed
Four: your share. If your decimal changes, every line changes with it. A unit change can do it. A new operator sets you up from its own division order, price contract and deduction schedule, and any of them can differ from the last operator's. Or your money can be held in suspense, so nothing is paid for a while.
One sample check
Here is one check, for a sample owner on that same lease. June paid $1,063.11. July paid $884.70. That is down sixteen point eight percent. The tax was the same four point six percent both months, so the deductions did not move.
What explains it, and what does not
The state says the lease sold one point six percent less oil, and the market fell five point one percent. Together that explains about six and a half percent. But the stub paid on twelve point six barrels, and the owner's share of what the lease sold was thirteen point two. That is four and a half percent less. And it priced them six eighty-six under WTI. In June, the gap was a dollar seventy-one.
Five: check the calendar
A fifth cause is timing. A month can be paid late. Oil is due sixty days after the end of the sale month, gas ninety. Two months can arrive on one check. And an adjustment for an earlier month lands on a later stub.
Ask for the detail
If the drop is bigger than the state and the market explain, ask. Please send the volume, price and deduction detail for my June and July sale months, and tell me whether my decimal or my deductions changed between them. Send it by certified mail. For questions about a payment, the payor must answer by certified mail within thirty days. If it is about a deduction the stub does not explain, the payor has sixty days.
What to do next
Split your own check's drop into volume, price, deductions and share with our free diagnostic. The sources for this video are on screen.
The sample owner is on a real Midland County lease (Interstate 8-32 C). The stubs are made up; the state volumes and WTI prices are real.