Individual Owners (“Owners” or “Owner”) include persons who, for their own account, as an owner of a company, as a general partner of a family partnership, or as trustee of a family trust, own or are charged with the responsibility of the management and supervision of royalty and mineral interests (producing and nonproducing), leasehold interests (working interests and overriding royalty interests), or surface interests, which are affected by oil, gas, and mineral exploration, development and production activities. In the following discussion, all of an Owner’s interest will be referred to as “Oil and Gas Properties” or “Properties”. This category includes an Owner’s agents, attorneys, and representatives.
Oil and Gas Properties often represent a substantial component of an investment portfolio or tangible property holdings of an Owner, in terms of valuation and cash flow. However, these Properties are sometimes overlooked, ignored, or neglected, from a “management” perspective.
The very nature of the oil and gas industry, with its unique and peculiar terminology, and oftentimes complex transactions, may lead to confusion on the part of an Owner, as to what rights he or she has regarding Oil and Gas Properties. The ability to effectively manage Oil and Gas Properties can require a wide scope of expertise, constant and thorough attention to detail, and an understanding of the ever changing market conditions in the proximity of such Properties. Anything less than aggressive management and continued monitoring may result in lost revenues, and in many cases, unnecessary expense or disadvantage in contractual relationships.
Oil and Gas Properties are often owned by families, passed down from one generation to the next. Earlier generations, who at one time may have been familiar with the rights associated with the Properties, may have stayed abreast of changes in industry practices. Successive generations, however, although responsible for the management and safe keeping of the Properties, may not have the time or requisite expertise to effectively manage these important assets, or may live a great distance from the area where the Properties are located, precluding the necessary attention required for effective management. Declining or lost revenues, and lost opportunities to maximize the income from Properties, are consequences of inexperience or unfamiliarity with mineral management.
MMC offers a variety of services to assist Owners who desire to obtain the services of or place the management of Properties with petroleum industry professionals. Experienced mineral management professionals, teamed with competent geologists, engineers, attorneys, and accountants, can actively manage an Owner’s Properties to seek to maximize economic returns. Management services can be effected through a variety of means, including agency agreements, or on a consulting basis.
The services available from MMC for Owners include:
1. Inventory Identification and Control.
A complete inventory of Properties owned and their status (whether producing or nonproducing) can be prepared. This inventory may then be monitored and periodically revised to reflect changes in the status of Properties (e.g., producing to nonproducing), and to track changes relating to acquisition and divestment of properties.
2. Revenue and Expense Monitoring.
Oil and gas accounting statements can be processed and analyzed. Revenue receipts are regularly incorrect, often by large amounts. Verification of proper ownership percentages and a comparison and review of pricing and production information will be undertaken to verify that the Owner is receiving correct payments. Oftentimes revenues may be “suspended” or held by a purchaser or disburser for various reasons. Companies responsible for disbursing revenue will be monitored to assure that proper and timely payments are made for all production attributable to an Owner’s Properties. Assessments will be made to determine if pricing advantages can be obtained through taking production “in-kind,” as provided for in oil and gas leases, and implementation of in-kind takes and marketing may be employed as being advantageous.
If the Properties include working interests, MMC can provide the analysis required to determine whether the Owner’s rights and obligations under Joint Operating Agreements are effectively protected and exercised, and whether Joint Interest Billings and Authorization for Expenditures are accurate.
3. Contract Negotiation.
An oil, gas, and mineral lease is the primary and controlling contract in oil, gas, and mineral related transactions. With the changing environment in the industry, now, more than ever, a satisfactory lease contract is mandatory. An inadequate or improperly prepared lease may subject an Owner to years of disadvantage. While most companies are ethical when dealing with Owners, they do attempt to negotiate transactions to their advantage. MMC will assist Owners or their agents, attorneys, or representatives, in the negotiation of lease terms which protect and enhance the value of the Owner’s Properties. MMC remains abreast of leasing markets and can advise its clients as to lease terms which the “market” should bear. For Owners of multiple Properties that are the subject of recurring lease proposals, MMC can prepare forms of oil, gas, and mineral leases, tailored to the Owner’s specific needs, desires, and concerns, which may be adapted for use in recurring lease transactions.
4. Division Order Analysis.
Companies which purchase production from producing wells, or make distribution of revenue attributable to that production, issue division orders prior to payment of revenues. MMC will review division orders received by an Owner to determine the accuracy of information pertaining to the Owner’s interests in Properties. Amendments to (or in some instances replacement of) division orders will be recommended and implemented when, in the judgment of MMC, lease provisions are not being met, an attempt is made to modify the terms of a lease to the detriment of the Owner, or the division order submitted contains terms inconsistent with statutorily prescribed forms.
5. Monitoring Delay Rental and Shut-in Gas Royalty Payments.
Payment of delay rentals and shut-in gas royalties are a component of and may be a condition to the continuing validity of many oil and gas leases. MMC will review and verify, for timeliness and accuracy, delay rental and shut-in royalty payment receipts. When payments are late, are not made, or underpayments occur, MMC will initiate efforts to secure releases of oil and gas lease contracts and return the affected Properties to an “available” status so a new lease (and additional revenue) can be obtained for the Owner.
6. Monitoring Property Taxes.
Property taxes will be reviewed and analyzed. Because of the volatile product pricing environment which the oil and gas industry is in, and due to frequently changing property tax rates and valuation assessment parameters, many Owners may be paying excessive taxes. MMC will monitor those Properties which appear over-taxed, and when requested will protest valuations on behalf of the Owner. Monitoring of tax due dates can be implemented to take advantage of possible discounts for timely tax payments.
7. Title Curative.
Many Properties may be in need of having documentation prepared or recorded in order to clear title defects to establish the Owner’s title, to allow the Properties to be leased, or the owner to receive payments that are due, attributable to the Properties. In those instances MMC will examine the title, and either prepare, or with the assistance of the Owner’s attorney, procure and record any necessary documentation to “clear” title to the affected Properties.
8. Environmental and Other Issues.
Environmental concerns, unitization and pooling contracts and agreements, drainage, and failure to develop issues, damage settlement negotiations, and geophysical (seismic) option contracts are becoming increasingly important to an Owner of Properties. MMC can assist in dealing with each of these matters to protect the Owner’s Properties and maximize revenues attributable to the Owner’s interests.
9. Valuation of Assets.
Experts in the fields of geology, engineering, and geophysics may be required for the proper valuation of Properties. MMC has available a network of highly respected petroleum specialists that can be called on, on an as needed basis, for valuation assistance.
10. Marketing of Property Interests.
A significant aspect of effective mineral management is the marketing of the Owner’s Properties. Geological, geophysical, and engineering evaluations, when combined with active marketing can create additional leasing and drilling activity on an Owner’s Properties. This activity provides the possibility of added economic gains to the Owner. MMC can assist the Owner in aggressively marketing Properties which are prospective for exploration and development.
If a decision is made to sell Properties, MMC can assist the Owner in soliciting offers from prospective buyers, in order to obtain the highest price for the Owner’s Properties.
11. Data Services.
For clients electing to utilize this service, MMC can supervise the implementation of fully automated and computerized accounting and land reporting programs to provide timely, accurate, and diverse reports to its clients. Monthly, quarterly, or annual reports can be generated according to a client’s needs. Having the ability to quickly evaluate and analyze accounting, acreage, and lease data, through comprehensive reports, places the Owner in a superior position to manage Properties and maximize revenues.