A Second Set Of Eyes Can
Provide Peace of Mind
The Value Behind The Royalty Audit
Oil & gas companies continue to drill in the
Marcellus and Utica Shale formations, which
means area landowners continue to receive
royalty checks for letting these companies
use their land to access the valuable resources
that lie beneath. Unfortunately, unless you
are clear about what you are actually being
reimbursed for, it can be really difficult
to determine if you’re being accurately
compensated.
A royalty audit is a great tool if you’re
questioning the accuracy of your royalty
checks, if you haven’t formed a relationship
with the oil producer, or if you’re simply
looking for peace of mind. Keep reading to
already been signed or to ensure that the of oil or natural gas during that specific time
correct terms are in place. period to the gathering, compression and
learn more about this tool and how it levels Leases can include a number of factors
the playing field between landowners and oil such as:
& gas companies.
WHAT IS A
ROYALTY AUDIT?
A royalty audit isn’t your typical financial
statement audit. It’s actually not an attest
service at all. Rather, it’s a consulting service
•
acreage
•
•
– a financial inspection, to be exact. Those
who specialize in this service examine a
Royalties from a drilling unit based upon
Number of producing wells in the
introducing the client to an oil & gas attorney
who can help interpret their lease if one has
this shouldn’t be a concern. Most reputable
individual lease. Even within the same unit
of production, there could be a number of
Landowner rights
which can be very difficult to understand. An
audit can last anywhere from a few days to
a few weeks and centers on the revenue side
as well as the deduction side. For those who
aren’t familiar with horizontal shale-related
wells, the deduction side is new. It’s actually
an area that, at least in Ohio, is not very well
interpreted in terms of case law. Because of
that, mistakes have been known to occur in
by: Scott Moyer, CPA
Principal
905 Zane Street, 2nd Floor
Zanesville, OH 43701
740.454.3297
[email protected]
relationship with the producer. However,
transporting, etc. We then walk through the royalty statements,
potential of their land. We start the process by
they think it might negatively affect their
Deductions for gathering, processing, recipients are receiving the appropriate
that helps landowners realize the full earning
about requesting a royalty audit because
producers are prepared to schedule the
•
Rea’s oil & gas team has developed a strategy
Landowners sometimes express concern
drilling unit series of data points to ensure that royalty
royalty payments from oil & gas companies.
transportation costs.
process, which starts with examining each
different royalty recipients, and they all could
hold different leases. It’s important to realize
every lease could be different, and what is due
to you depends on your specific lease terms.
As a rule, a landowner should have 50 to 100
acres to make the royalty audit worthwhile.
However, we also offer a royalty monitoring
program, which is a type of pre-audit that
analyzes the royalty recipients’ check stubs to
determine trends where potential errors may
surface.
this particular area. (If you have deductions Utilizing a CPA firm that specializes in royalty
on your royalty check stubs, you are a very audits will help ensure you have a team that
good candidate to, at least, consider royalty will develop a strategy for you to realize the
auditing.) full earning potential of your land. Give me a
During the royalty audit, we analyze
call to learn more.
everything on the check stubs, from the cost
Rise & Shine • Spring 2019
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