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WHEN DO I GET PAID - 6/21/14

Posted by admin on June 21, 2014

This question is coming up more and more frequently. Earlier wells had mostly large mineral/royalty owners and this question didn't come up much. 

More and more of these new wells include a larger number of royalty and mineral owners, many of which are smaller owners and are absentee owners...especially in Mississippi.

I was a smaller royalty and mineral owner on some of the earliest wells in the TMS. So, I will share what my understanding of the payment process is.

There are enough other folks out there by now who have also gone through the process of receiving royalty payments that you can offer your insight and I encourage you to do so.

But, here is my understanding.

Checks are generally made around the 25th of the 2nd month after the month of sales from production.

So, for example, January production with sales should normally be paid on March 25.

However, let's say a well begins production on January 31, but first shipment is not made until February 1. In this case, the first royalty payments would be expected by April 25.

NOW, when a well/unit first begins to produce, a division order is sent out to each royalty/mineral owner of whom the operating company is aware. 

Each individual owner is given this document to show how his ownership decimal in income is computed and asked to sign the document to agree to the decimal ownership amount.

If you agree with the computation, then you sign the division order and return it. If you do not, then you can attempt to resolve it with the operating companies.

In my experience attempting to get the ownership decimal corrected is a pain in the tush. 

Legal folks with these operating companies have prepared the computation you are sent in the division order and they have made a meticulous study of a unit to arrive at what they believe to be correct ownership decimal amounts. That said, your questions are referred to someone who, while nice and pleasant, doesn't have the authority to correct the records and, frankly, pleasant or not, doesn't want to listen to you. (You can hear it in their voice, okay, I'm not a psychic, but if you experience it, you'll agree.)

Personally, I disagreed (and was right) but finally found it a LOT easier to use an attorney. If you can get your attorney to understand your issue AND he agrees, then he/she can get through to the operating company's attorneys and get the darn thing changed, whereas we peons cannot. (Trust me, the clerks prefer this method, also.)

Now, if you want to get your blood pressure up, go ahead and try to get it corrected yourself. I gave it the old college try, so I can't fuss at you for doing so, also.

All that said, I encourage you NOT to endorse and cash any royalty check until the division order is finalized to your satisfaction AND the check agrees to your correct ownership decimal amount and agrees as to the proper owner's name.

Now, if you believe you are under a well and you have neither received a check nor a division order by the 25th of the month following the first month's production/sales, then, just like disagreeing with the division order, you can try to contact the operating company to learn what's going on.

Each of these companies have a website with a tab reading something to the effect of "Owner Relations." You can try going through there.

But, again, I would encourage you to take your case to an attorney. 

You may, in fact, be mistaken in thinking you own an interest when you do not. But, even if you're right, communicating that to someone in the owner relations department will likely be a challenge.

That said, I have had no issues once things got rolling. 

I realize my situation was unusual, though certainly not unique, and I don't wish to be negative. I do think these operating companies and their employees want to pay out the correct amount to everyone.

You just need to make sure you are satisfied early on in the process. Getting it corrected later can be a pain. 

By the way, it is just as bad if the decimal is too high as it is if it is too low. If it is too high, when the overpayment is discovered, then you simply won't get a check until they have recouped the overpayment. This isn't a lot of fun either.

Okay...others with experiences please share.

What do you think about it?