Monthly Archives: June 2017

Oil Glut & Royalty Fraud Hurts Mineral Owners

It came out this week that Permian Basin players are getting $1 for every $1.33 that they spend. Yet we see the notion that “shale oil” has made the USA the top producer and swing player. Imports are “down” to 25% of our consumption.

Actually imports make up about 50% of our production because we import oil and export the light liquids that are a glut upon the industry. Those light liquids cannot be refined into gasoline, and to make gasoline must be blended with the heavy tar sand oils of Canada. This relationship apparently has been badly misunderstood by the popular press, and therefore, the public.

The term “shale oil” is also a misnomer. Much of the production from horizontal drilling and fracking comes from traditional Mississippian formations that are not shale per se. They are predominately limestone and other non-shale rocks. Thus, this is conventional production from unconventional technology. And actually the technology isn’t unconventional, it is simply advanced compared to that of thirty years ago.

The profit of the players relates to their ability to sucker foreign investors into funding their little charade while throttling the vendors providing services on the one hand, and the mineral owners on the other. The mineral owners are getting screwed by excessive post-production expenses and their leases are treated as cash cows to be milked by the oil companies. The result is mineral owners are suing and winning in court. Many settlements and judgments have already been handed down and the mineral owners need to mobilize against the oil companies and demand the state legislatures re-instate the minimum 12½% royalty FREE from any post-production expenses.

Snow v. SEECO Class Action Settlement

Snow v SEECO is an Arkansas class action settlement out of Conway County, AR proposed (as of this date not approved). It purports to refund to the class of SEECO mineral owners some $30 million …but wait! Half is somehow taken out of the mix, and the lawyers want 45% of the $30 million for their fee. That doesn’t include the expenses they claim that exceed another half million by 50% plus.
So how much will each mineral owner get? For some the sum will be so small that a postage stamp will cost more than the settlement will pay. So thousands, if not tens of thousands, of mineral owners will get nothing. That’s the reality of class action lawsuits.
With the low prices having driven out all the players that were here ten years ago, SEECO remains pretty much the last man standing. XTO is doing very little, and BHP Billiton has put its properties back on the market after writing down $2.6 billion with a “b”…and now the assets were listed as of the end of 2016 as being worth a mere 900± million…with an “m”.
Without competition, expect mineral owners to be force pooled or offered a mere 1/8th royalty, subject to post-production expenses, and perhaps $50 an acre…the same price SEECO paid before Chesapeake created real competition in the Fayetteville Shale. What a rip off for mineral owners.
We desperately need to reestablish 1/8 of the GROSS PRODUCTION VALUE as the basis for a MINIMUM royalty in the state of Arkansas. Call you local congressmen and state senators.