Download August 27, 2002

[LETTERHEAD]
[DATE]
VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED
[ADDRESS: ROYALTY RELATIONS
OR IN-HOUSE COUNSEL]
Re:
[NAMES OF PRODUCING LEASES/UNITS ABOUT WHICH LETTER IS
INQUIRING]
Mr./Ms. ____________________:
I am a royalty owner in the above-referenced producing properties. Under the
lease(s) for these properties and related oil and gas law, I am entitled to know the bases for
pricing and volume used to determine my royalty payments.
Below, I have prepared a set of direct questions seeking information and/or
documents that will enable me to understand the bases used to determine my royalty
payments. I am willing to sign a confidentiality agreement to limit my use of any
information you share with me, and I am willing to return to you any information you share
with me following my review.
Within the next four weeks, please provide information responsive to the requests
below:
Crude Oil
1.
Please provide the purchase contract(s) whereby the crude stream is sold to
the first purchaser of my royalty oil. If your company acts as such first
purchaser, then please provide the purchase contract(s) whereby the crude
stream is sold to the first arm’s-length purchaser.
2.
If you are unable to provide the foregoing purchase contract(s) for the oil, then
describe in detail the pricing basis used in such contract(s), including the
starting posted price, quality differentials, transportation differentials, pipeline
tariffs, deductions, and other components of your lease-price formula.
3.
Please provide for January 2012, May 2012 and August 2012: Run tickets (or
other statements) showing the gravity, temperature and volumes for the crude
stream, on the lease/unit and at the delivery point to an arm’s-length buyer.
4.
For the same months in the foregoing request, please provide itemizations (or
other statements) of post-production transportation, marketing and treatment
costs for the crude stream.
5.
For the lease(s) entitling me to royalty oil, please confirm that you are paying
oil royalties in compliance with the lease’s royalty clause.
6.
Please provide a written description or formula for how you determine the
prices and volumes on which you pay my oil royalties.
Casinghead Gas, or Other Liquids-Rich Gas
1.
Please provide plant processing agreement(s) for the gas stream, as well as the
sales agreement(s) and plant tailgate agreement(s) if they differ from the
processing arrangements.
2.
If you are unable to provide the foregoing agreement(s) for the gas, then
describe in detail the pricing basis used in such agreement(s), including the
prices for sales/processing on a percentage-of-proceeds basis or other pricing
standard, fees per MCF/MMBTU, trans and frac fees for plant products, and
downstream sales prices such as OPIS prices.
3.
Please provide for January 2012, May 2012 and August 2012:
chromatographs or other gas analyses taken from samples at the field meters
and plant inlet. Such information should show at least the following:
Delivery pressure
Temperature
Gravity
Gas components on a Mol % basis
Contaminants
Data for determining GPMs
4.
Please provide for January 2012, May 2012 and August 2012:
(a) gas-to-plant volume statements showing the volumes of the various gas
streams that send unprocessed gas to the plant;
(b) lease-use statements (and/or unit-use statements) showing the volumes of
residue gas returned to lease operators (and/or unit operators) for lease use
and/or unit operations;
(c) plant-use statements showing the volumes of residue gas consumed by the
plant in operations; and
(d) statements showing the volumes of residue gas available for sale after
extractions of liquids, lease use, unit operations and plant use.
5.
For the lease(s) entitling me to gas royalties, please confirm that you are
paying such royalties in compliance with each lease’s royalty clause.
6.
Please provide a written description or formula for how you determine the
prices and volumes on which you pay my gas royalties.
Gas-Well Gas, including Shale Gas
1.
Please provide gathering and sales agreement(s) for the gas stream.
2.
If you are unable to provide the foregoing agreement(s) for the gas, then
describe in detail the pricing basis used in such agreement(s), including the
prices for sales/processing on a percentage-of-proceeds basis or other pricing
standard, as well as fees per MCF/MMBTU.
3.
Please provide for January 2012, May 2012 and August 2012:
chromatographs or other gas analyses taken from samples at the field meter(s),
pipeline inter-connect(s), and sales delivery point(s). Such information should
show at least the following:
Delivery pressure
Temperature
Gravity
Gas components on a Mol % basis
Contaminants
Data for determining GPMs
4.
Please provide for January 2012, May 2012 and August 2012:
(a) volume statements showing the volumes of the various gas streams that
send gas through the field meter;
(b) gas-use statements showing the volumes of gas consumed in gathering
and transportation; and
(c) statements showing the volumes of gas available for sale after gathering
and transportation.
5.
For the lease(s) entitling me to gas royalties, please confirm that you are
paying such royalties in compliance with each lease’s royalty clause.
6.
Please provide a written description or formula for how you determine the
prices and volumes on which you pay my gas royalties.
I look forward to your response within the next two weeks. Please write me if you’d
like clarification/simplification of any of the foregoing requests. These requests are thorough
not because they request voluminous data. Rather, they describe with particularity what I
need to review in order to facilitate your search and production of the documents and
information.
Sincerely,
[NAME]