Joint Interest Audits – Am I Getting My Share?

In the environment of oil and gas operations where the revenue and expense decks keep growing, how do you know if the operator is giving you your fair share? Joint operating agreements generally have an audit provision. Whether or not you should invest in the cost of a joint interest audit depends on several factors including:

• Do I have a large interest in this well?
• Do the joint interest billings look unusual or not provide detail?
• Are the costs well over budgeted or reasonable amounts?
• Are there several wells in the same area that have similar names but different ownership percentages?
• Are there carried interest provisions in the agreement?
• Is the overhead based on actual costs rather than an agreed upon rate?

The number of transactions processed by the operator can lead to data entry or allocation errors. While many of the occurrences mentioned could happen within normal operations, they could also be erroneous charges or calculations.

The scope of a joint interest audit can include expenditure testing, payout recalculation for carried interests, revenue allocation, overhead charge analysis, review of classification of expenditures as direct costs versus overhead, and more.

You may not have the resources to provide the time necessary to perform and follow-up on a joint interest audit. A consultant can be hired to perform these services for you. While you incur the cost of a joint interest audit, the returns often exceed the cost.

Feel free to contact us if you would be interested in pursuing a joint interest audit or have any questions concerning the audit process.