The Joy and Frustration of Your First Oil Check
Nothing compares to the thrill of receiving your first check from an oil well. However, this excitement can quickly turn into frustration as you realize that non-operated interests are declining assets, and most new wells today are drilled horizontally. Within the first three years, about 50% of total production occurs, meaning your income drops significantly with each subsequent check. This article aims to shed light on the often confusing aspects of your oil and gas revenue, focusing on the critical distinction between payment month and production month.
Key Differences: Payment Month and Production Month
Many owners are unaware that there are two significant dates on their checks: the payment month and the production month.
- Payment month: This is when you actually receive the check.
- Production month: This is the month during which the hydrocarbons were sold.
Your first check typically includes 3-5 months of production, rolled into a single payment. Afterward, you usually receive monthly payments.
The Impact of Prior Period Adjustments
Owners of gas-heavy wells are familiar with prior period adjustments. These occur when midstream and downstream companies reassess payments based on the actual delivery of hydrocarbons. This process can create discrepancies, as adjustments from up to a year or more can appear on your checks. These adjustments can make your income look erratic, with occasional spikes and dips that don’t necessarily reflect the true monthly production.
Leveraging Bulk Data Downloads
Thanks to technological advancements, you can now use Bulk Data Downloads on MiQ+ to view your payments by production month compared to the payment month at both the operator and property levels. This tool allows you to see the actual income received based on the month the hydrocarbons were sold, providing a clearer picture of your revenue stream.
Benefits of Using Bulk Data Downloads:
- Smoother payment visualization: Viewing data by production month offers a more accurate representation of income, smoothing out the fluctuations seen when relying solely on payment month data.
- Accurate forecasting: Understanding how your income is declining over time is crucial for long-term financial planning.
- Error detection: Comparing payments by production month can help you identify if you have received payment for every month of production, spotting any inaccuracies in payments.
Spotting Payment Inaccuracies
Comparing payments by production month to the actual production status of your wells can also help you identify any missing payments. Ensuring that you have received payments for every month a well was in production is crucial for accurate income tracking. This practice can help you catch any errors or omissions in your payments, ensuring you receive what you’re owed.
Stay Informed, Stay Prepared
Understanding the nuances between payment month and production month can significantly impact how you manage and forecast your oil and gas revenue. By utilizing tools like Bulk Data Download from MiQ+ and paying close attention to production month comparisons, you can achieve a more accurate and smoother income flow, helping you stay prepared for the future.
Get all the support and resources you need to manage your mineral assets. With MiQ+, mineral owners gain control, optimize revenue and ensure accurate royalty payments with proper auditing. Make sure you receive accurate compensation and better prepare for the financial future of your mineral assets with MiQ+.