Repeat of discussion from Hayneville site - accidentally got going in that blog group - copying back over here (EF) before continuing saga...

May 10, 2018 at 11:33am

Follow up phone call to CHK phone number on new pay stub (debacle):

1) Why are both Feb and Mar sales included on one pay stub instead of just Feb as it would have been in the past?

"We are making a transition to running 30 days behind on payment, rather than the previous 60 days behind production that we were running, so this month's check should be approximately double what it would have normally been."

2) But, it is not double. It is about one and one-half times the normal amount. Why is that? Is it for a partial amount from March?

"I do not know. I will have the revenue team review your payment detail and contact you with an answer."

3) Why are quantities different from RRC amounts by large amounts?

"I do not know. I'll pass your comments along to the revenue team and have them contact you to explain."

4) What is this new "Payment Decimal" that is being used in place of the owner fraction to calculate the check amount?

"We have had a lot of people ask that. I do not know. I will also pass that along to the revenue team to try to answer that for you."

5) Using your sale quantities (which I am not in agreement with), and the new "decimal payment" fraction, the payment amount is about 50% higher than if I calculated it using my owner fraction as was done on previous paychecks. Though I shouldn't complain (haha), the old saying "what seems to be too good to be true, usually is the case" is probably going to hold true and bite me in the end."

"I agree, and will pass your comment on for the revenue team to research and call you back about."

Not too much learned about the new payment method yet, except the 30 days in arrears versus 60 days change.

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Almost a month after requesting CHK Revenue Dept. assistance, and not receiving a May 31 payment, I got tired of waiting and contacted the CHK landman with a repeat of the questions, along with a couple of new ones - the following is a synopsis:

I explained to the CHK guy that since I monitor the RRC site, I could tell that we were not fully paid for March production. My April 30 check was not double the usual amount, but more like 1 and 1/2 times the usual. The new "payment decimal" used in place of the owner fraction on that April check, he explains is a fraction the new accounting firm came up with to try to distribute various owner sharing agreement amounts (agreements with other revenue sharing companies - see his words below if I am not quite getting it right) back to the lease owners. "New math" in my book - cloudy to say the least. He agreed, sort of. He also said that in the midst of this accounting firm change, they also attempted to make the "lag time" change from 60 days to 30 days, and now have realized it will not work, and have decided to go back to 60 day payment lag times. (adding more confusion to the payment check environment)

The pertinent part of his follow up explanation - a little paraphrasing, but mostly CHK's statement:
"The problem has to do with Chesapeake converting to SAP software in April.  Sounds like the timing of the software conversion was problematic in terms of timely paying of severance taxes to the State.  In order to ensure proper payment of severance taxes, revenue payments for oil in March were processed one month early.  As production actuals had not yet been computed, revenue payments for March were based on estimates which were derived from each well’s prior month production.  If March production was overestimated and you were paid too much for said production (your April payment), then the money was rebalanced in May.  It would appear March production was overestimated and paid  in April and the resulting overpayment needed to be rebalanced. (?? - not quite covering my particular issue, but, OK) The bad news is a low revenue payment for May. (none, actually) The good news is you should have received a good part of May’s payment in April. "(a bit over half)

(not quite covering all the bases, but seems like a good faith effort to explain; sounds like the execs made decisions that made it confusing to staff almost as much as it made it to owners)

Anybody else missing May's check?

If what I am hearing is correct - the June 30th/July 1st check "SHOULD" cover the production for April and the remaining part of Mar that I didn't see on that April 31st check. And, then things SHOULD go back to the usual schedule.

I mentioned that I understood that RRC site reported production for our well will not always match what is actually sold and so then what we are paid for, sometimes less, sometimes more than RRC numbers, but, over a period of time, the differences should balance out. He agreed.  

Still going to be watching that new "payment fraction" also.

Anyone else seeing things this way?


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