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Revenue and Royalty Audits

Complex gathering systems, processing plants, midstream operations, and oftentimes numerous intermediaries and operator-affiliated parties, paired with increasingly complicated contract or lease provisions, require specific expertise to conduct a proper and thorough revenue or royalty audit.  Most times it is impossible to decipher the sales volumes, prices paid, deductions taken, or even the net revenue interest from revenue remittances, much less make sure they are correct.

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Why do the volumes on my remittance not tie to the state reported production volumes?
Why is the price received so different from NYMEX or WTI Cushing?
Is the “gross price” on my remittance really the “gross price” or is it net of embedded deductions?
What kinds of deductions are being taken out and why? My agreement says “no deductions.”
Are taxes properly calculated?
Revenue Audit

A revenue audit is performed to determine if working interest, net profits, royalty, or overriding royalty interest revenues are properly paid under the applicable agreement(s), such as a Joint Operating Agreement (JOA), marketing agreements, farmout agreement, net profits lease, or oil and gas lease. 

A royalty audit is performed to determine if a lessor is properly paid under a lease agreement.  With the complexities and intricacies of today’s lease agreements, it can be very difficult for operators to correctly account for revenue payments to royalty owners, especially when the lease agreements have differing valuation and volume clauses than a typical Joint Operating Agreement. 

  • Non-arm’s length sales to affiliates
  • Weighted Averages Sales Prices (WASP)
  • Fuel, flare, and lost and unaccounted for gas volumes
  • Sales volumes compared to state or Federal reports
  • Shrink volumes
  • Affiliate gathering deductions
  • Affiliate processing deductions
  • Marketing deductions
  • Weighted average deduction pools
  • Gross proceeds provisions
  • Highest price provisions
  • Fixed recoveries vs actual recoveries for NGLs
  • Payout calculations
  • Net Profits provisions and calculations
  • Gas plant proceeds and volumes
  • Percent of Proceeds (POP agreements)
  • Proceeds owed to bank trust departments
  • Royalties owed to state and Federal governments
  • Gas balancing
  • Allocation methods for residue, NGLs, and oil sales
Revenue Audit

A revenue audit is performed to determine if working interest, net profits, royalty, or overriding royalty interest revenues are properly paid under the applicable agreement(s), such as a Joint Operating Agreement (JOA), marketing agreements, farmout agreement, net profits lease, or oil and gas lease. 

A royalty audit is performed to determine if a lessor is properly paid under a lease agreement.  With the complexities and intricacies of today’s lease agreements, it can be very difficult for operators to correctly account for revenue payments to royalty owners, especially when the lease agreements have differing valuation and volume clauses then a typical Joint Operating Agreement. 

  • Non-arm’s length sales to affiliates
  • Weighted Averages Sales Prices (WASP)
  • Fuel, flare, and lost and unaccounted for gas volumes
  • Sales volumes compared to state or Federal reports
  • Shrink volumes
  • Affiliate gathering deductions
  • Affiliate processing deductions
  • Marketing deductions
  • Weighted average deduction pools
  • Gross proceeds provisions
  • Highest price provisions
  • Fixed recoveries vs actual recoveries for NGLs
  • Payout calculations
  • Net Profits provisions and calculations
  • Gas plant proceeds and volumes
  • Percent of Proceeds (POP agreements)
  • Proceeds owed to bank trust departments
  • Royalties owed to state and Federal governments
  • Gas balancing
  • Allocation methods for residue, NGLs, and oil sales
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Matt Pilkington

  • m.pilkington@theabsolutelongestwebdomainnameinthewholegoddamnfuckinguniverse.com
  • (405) 728-3003 ext. 1203