Oil and gas operating companies and non-ops — mineral, royalty and working interest owners — are two sides of the same coin. In the digital age, non-ops need to be just as data and software savvy as E&Ps, but technology innovation has historically focused on operators. However, there is good news for non-ops.
With Enverus’ purpose-built mineral management technology and business automation solutions, non-ops are able to automate revenue delivery and manage portfolios at any scale. With critical data sets built directly into these tools (wells, volumes, mineral appraisals, units, rig activity, etc.), users can manage the entire investment lifecycle from pre-acquisition due diligence , mineral portfolio management through maximizing deal value for divestitures.
Let’s review the day-to-day management of a non-op portfolio and show how mineral funds, family offices, banks, foundations and endowments know that they are always in pay, ensure revenue accuracy and optimize their G&A costs.
What’s holding back the non-op back office?
While operators and non-ops may be two sides of a coin, mineral, royalty and working interest investors have very different business drivers with tough questions that need answers, such as:
- Am I getting paid correctly for my interest in a well?
- Were the right commodity prices used to calculate my revenue?
- Are operators charging me correctly for deductions?
- Am I in pay on all new producing wells on my property?
- Am I being paid correctly following the payout conversion on a well?
- Were the correct oil, gas and NGL volumes used to calculate my revenue?
These are straight forward questions that are all too often impossible to easily answer.
One of the biggest barriers is the massive paper data problem and persistent manual data entry that non-ops face in the back office. It’s not uncommon to receive a check stub for a stripper well that’s more than 300 pages, making it cost more to process revenue details than the hydrocarbons are worth. Many non-ops struggle to close their month and that leaves precious little time to consider the big picture, missing wells and underpayments.
Non-ops also contend with a fragmented digital ecosystem of software and data silos, presenting a complicated mix of paper-based processes and digital revenue and JIBs. Organizational barriers to answering simple questions also persist that impede efficient mineral management workflows, including departmental layers of ownership where land owns leases and division orders, while accounting owns revenue and expenses.
These old methods of managing the non-op back office stand in the way of answering important questions. The main cause for underpayments (or non-payment for missing wells) is simply operator oversight. Today’s fast-paced production environment places enormous strain on operators who are being asked to produce more. Underreported volumes, missing wells on revenue detail statements, incorrect decimals and improper deductions (e.g., being charged for a no-cost lease) fall through the cracks.
A better way forward through automation and integration
One hundred percent of your non-op revenue can now be delivered straight into Enverus’ cloud-based mineral management software for touchless revenue processing. This is achieved through a combination of an automated operator data exchange and scanned document data extraction services for out-of-network operators, making all your revenue available within a few days instead of weeks or even longer. This completely replaces manual entry and check detail processing, eliminating human errors.
There’s tremendous payoff for hunting down and eliminating underpayments. And just think what higher value tasks accounting staff can be redirected to!
Spotting missing wells
Building a list of well names and API numbers to spot missing wells is a simple solution that would normally require hours of painstaking work. But increasing M&A activity results in well names changing several times within a few years, which can make it difficult to know when a new well goes in on your property. Enverus’ cloud-based mineral management software makes this a fast, simple process. This technology also empowers users with email alerts and cloud-based maps to monitor acreage by exception, track rig movement and see when frac crews show up for a completion to identify wells they should be in pay on.
Auditing improper deductions
Depending on the type of interest you own and the terms of a lease, you might be exempt from paying some post-production costs, but the operator charges you anyway through revenue deductions or even adjusting realized prices. To prevent taking a hit on your margins or even a negative royalty, users of cloud-based mineral management solutions can run a no-cost lease audit to spot improper deductions using a pre-built report. Simple!
Finding incorrect ownership decimals
Don’t assume your interest decimals are correct! Mineral interest is tracked to the eighth decimal place, so even a small miscalculation, dropped decimal place or rounding error can impact your bottom line or result in you cutting a check to the operator from an overpayment. Enverus’ mineral management technology helps you find decimal issues by digitally managing land information in a central location so you can stay organized and take action to correct and recover missing revenue. No more filing cabinets!
Identifying underreported volumes
Oil and gas operating companies are driven by two monthly production reporting cycles. The complexities of accounting for sales and paying interest owners, plus state regulatory reporting, doesn’t always produce the same financial statements and underpayments are often missed.
By bringing production verification tools, check stub details and public data sets together, mineral management and business automation solutions equip non-ops to find the underreported volumes that they are owed on faster than ever.
Payout and interest conversion
Preventing this type of underpayment is especially tough because payout on a new well can take years with multiple factors determining the timing. Missing a payout conversion can have huge implications, especially if there is an unleased interest in a drill tract that is not subject to forced pooling.
Enverus’ mineral management technology helps you avoid interest conversion underpayments by ensuring land records are effectively managed, allowing for easy data mining of agreements involving payout provisions. Then you can match those agreements with relevant wells and reconcile payout status and revenue to address any issues.
Final thoughts
The digital oilfield presents a widening technology capability chasm. Like operating companies, non-ops are just as hungry for technology that enables them to focus on A&D decisions, audits and deal analysis, instead of being bogged down in revenue processing. Enverus has leveled the playing field. MineralSoft and EnergyLink have become the gold standard for non-ops to manage their business, a powerful combo that empowers them to automate revenue delivery and manage portfolios at any scale. Combined with Enverus data sets (wells, mineral appraisals, units, activity analytics, placed wells), Enverus helps you manage the entire mineral asset lifecycle from pre-acquisition due diligence through maximizing deal value for divestitures. We have more than 1 million properties under management accounting for 85% of North American royalty revenue and 350,000 wells (nearly half of total well count).
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