Operators print your statement for their accountants, not for you. Here is what every column, code, and deduction actually means, and how to tell whether the number at the bottom is right.
A royalty statement is a receipt written in a private language. Once you know the vocabulary, you can check the arithmetic yourself in about five minutes, and you should, because the errors we find are almost never dramatic. They are a decimal that is wrong in the sixth place, or a deduction that should not be there.
Near the top or in the left columns you will find the property or lease number, the operator's internal ID for the well or unit, and usually a well name and API number, the unique 10 to 14 digit federal identifier. You will also see an owner number, which is you in their system, and the production month and year, which is almost always two to three months before the check date. That lag is normal: the oil has to be sold, measured, and settled before anyone gets paid.
The single most important number here is your decimal interest, usually shown to six or eight places. It is your share of every dollar the well earns. Most states require it on the statement, and you can check it yourself: net acres divided by unit acres, times your royalty rate, times any allocation factor for a multi-unit horizontal well. Our decimal decoder does it both directions.
For each product you own, the statement shows a volume and a price. Oil volume is in BBL, barrels of 42 gallons. Gas is in MCF, thousand cubic feet, or sometimes MMBtu, million British thermal units, which measures heat content rather than volume. If your gas is rich, meaning it carries a lot of liquids, the MMBtu number will exceed the MCF number, and you may see a BTU factor or BTU adjustment applied. That is legitimate. Gas contracts often price on heat content because that is what a buyer is actually purchasing.
You may also see separate lines for condensate or plant products such as NGL, natural gas liquids: ethane, propane, butane, and natural gasoline stripped out at a processing plant. Those liquids are worth more than the gas they came from, which is why they are broken out.
Gross value is volume times price for the whole well. Owner gross is that number times your decimal. If those two do not reconcile, stop and call the operator, because everything below depends on them.
This is where owners get surprised, and where lease language matters most.
Severance or production tax is a state tax on the value of production, withheld from your share and remitted for you. Oklahoma's is the gross production tax; Texas, New Mexico, and the rest each have their own rate. This one is not negotiable and it is not the operator's doing.
Post-production costs are different, and they are the ones worth reading closely: gathering (moving gas from the wellhead to a pipeline), compression (pressurizing it to enter that pipeline), dehydration or treating (removing water and contaminants), processing (stripping out the liquids), and transportation or marketing fees. Whether an operator may charge these against your royalty depends on your lease language and on your state's law, which differ sharply. A lease with a strong "cost-free" or "no deductions" clause bars most of them. A lease silent on the subject usually does not.
Ad valorem tax appears in states like Texas that assess minerals as property. Look also for prior period adjustments, which are corrections to earlier months, and negative volumes, which usually mean a reversal of something previously overpaid. Those are normal, but a long run of them deserves a question.
Multiply the well's gross volume by the price, then by your decimal. Compare that to owner gross on the statement. Then add the deductions and confirm the net matches the check. If the decimal is what surprises you, run it through the decimal check. If the deductions are what surprise you, pull your lease and look for the royalty clause language about costs. And if a well simply stopped paying, the money may be sitting in suspense, which is fixable.
Call the operator's owner relations or division order department; our operator directory has the phone number for most of them. Ask for a written explanation of the specific line. In several states, including Texas, Kansas, Wyoming, North Dakota, and Montana, you have a statutory right to demand an itemized explanation of every deduction by certified mail, and the operator has a deadline to answer. We cover those rules state by state on our royalty payment laws page.
If you would rather have someone else read it, send a photo of the stub through Ask a Landman or text it to 918-984-1645. We read these every day, we will tell you what we see, and it costs nothing whether or not you ever sell.
Free, no obligation, and no pressure. Send whatever you have, even just the county name, and we reply within one business day.
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