Payment fluctuations: why do your payments change from check to check
“Why are my checks changing every month?”
This is one of the more difficult questions in managing royalties. It’s that unsettling feeling that something isn’t adding up, but we are unsure what to do. Do we ask the operator? Will they give us a concrete answer? Do we try and analyze a 100-page check with hundreds of numbers and codes? Do we turn over control of our ownership at a 4% cost to a management firm?
As royalty owners, we are provided the required information on our wells, but no real insight into how to interpret the data or understand when something just doesn’t look right. The main components of mineral management should take under an hour to complete every month.
Why is my check getting larger or smaller?
This is an important question as minerals are a living asset. Three main factors affect your checks: number of wells, volume and prices. For most owners, it is nearly impossible to determine which of the three are creating changes in monthly income. Your check stubs are too long and complicated to determine what is going on. Even if you pay an accountant, they are usually not looking into the detail on why the check looks the way it does.
When trying to determine if volume and pricing is affecting your check, you will need to look at the volumes over time and the price paid. If volumes are going up and prices are flat, your income is going up. If volumes are flat and prices are going down, your income decreases. In some cases, both the volumes and prices are decreasing which creates an exponential decline in income. Luckily, determining the effect of these two components is straightforward with MiQ+. We provide both volumes over time and weighted average price paid for a rolling 12 months to let you see how they are affecting your income. You can also see the expected income over the course of the year as we forecast the production on all your wells in pay at your ownership level and update the estimation every month. No more second guessing if your checks will continue to decrease based upon production or pricing.
Was I paid on every well?
This is an even more difficult question to answer is. If you have more than 50 wells in pay, you are aware of the difficulty of understanding if you were paid on every well every month. Your check stub is just too long to spend the time looking at every line to determine if you were paid. But this is an important metric to track. If a well goes offline or is sold and you are unaware, your payments may go into suspense. It is up to the owner to determine if there are any issues and to raise awareness to the appropriate parties. It is also crucial to eliminate the worry that you are paid on every well and no payments are falling through the cracks. Luckily MiQ+ provides a single click download which will provide your income over time on all your wells in pay. Quickly filter to see if you were paid on every well last month or not. If payment was not received, why? Was the well offline? In suspense? Is there a rig nearby drilling new wells? Using MiQ+ map with rig tracking, you can quickly see if a well was producing in the last production month or if there is a rig nearby which may have shut in your well to protect it.
Managing your minerals shouldn’t require costly services or an advanced degree in the industry. When you can audit the main drivers of your checks – number of wells in pay, volumes and pricing – you can manage your minerals more effectively. What is the value of having peace of mind?
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This could be the beginning of something great.