01. What is an oil and gas lease?
An oil and gas lease is a written agreement in which a mineral owner (the “lessor”) allows another person or company (the “lessee”) to explore for, drill, and produce oil or gas on specified lands for a certain period of time in exchange for the payment of royalties. The lease provides a legal description of the property, the amount of royalty to be paid (typically expressed as a fraction, e.g., 1/8 or one-eighth), the length of the lease (also known as the “primary term,” typically for a specific number of years), and the rights and obligations of the lessor and lessee.
02. What are royalties?
Royalties are the mineral owner’s share of production as reserved in an oil and gas lease. The royalty amount is usually expressed as a fraction of the total amount of hydrocarbons produced from the leased premises (or the proceeds attributable to such production). Typically, the first revenue distributed by Southwestern Energy is 60 days after the first month of sales. Therefore, if a well begins producing in January, the first revenue to be distributed would be in March. Checks are typically mailed on the 25th of each month. However, several things may affect the issuance of an owner’s first royalty check. The first distribution of revenue may be delayed if clear title to the property has not been received. In this situation, there may be a delay of up to six months following first sales if clear title has not been received or resolved. (See FAQ #3 concerning Clearing of Title). Also, checks are issued if the owner’s total royalty is greater than $100. If an owner’s total royalty is less than $100, a check will be issued once a year (See FAQ #9). Occasionally, wells may be capable of producing gas but lack adequate pipeline connections. Therefore, production will begin pending connection to a pipeline. Once production begins, the 60-day revenue, or six-month title resolution, distribution applies.
03. What is “clearing title”?
Before obtaining an oil and gas lease, drilling a well, or making payments under a division order, the operator wants to determine who owns title to the surface, minerals, and royalty and working interests in the land. This is done to ensure the operator has the legal right to drill and so the operator knows which parties have a legal right to production or royalties. Title is typically determined by a title opinion, which is an attorney’s written legal opinion based upon an examination of the real property records in the county where the land is located. The opinion often recommends that curative instruments be obtained before the property interest is purchased, drilled on, or otherwise dealt with. This process may take several months and may affect the timing of your first revenue payment.
04. What is a division order?
Once title has been “cleared” (i.e., verified by a title opinion) and a producing well has been drilled, a division order authorizing the sale of production from the well is sent to all royalty and working interest owners for their signatures. The division order sets forth the decimal interest of production owned by each party, their addresses, and a legal description of the property on which the well is located. A tax identification number or Social Security number is also requested on the form in order to avoid backup withholding deductions of 28 percent as provided for under IRS regulations (See FAQ #21). The owner may make an address correction on the division order. The owner’s signature on the form will allow us to make the address change on our records prior to making a royalty payment.
05. What are common interest types shown on my check and what do they mean?
Interest types are represented by a numeric code on Southwestern Energy’s check detail. Code explanations are shown below.
- Working Interest: The exclusive right granted to the lessee to explore for and to produce and own the oil and gas located under the lands covered by the oil and gas lease. The working interest owners bear all costs of exploration, development and operation.
- Royalty Interest: Lessor’s share of production as set forth in the oil and gas lease.
- Overriding Royalty Interest (ORRI): An interest in production that is created and payable out of the working interest. Usually, the term of an ORRI is for the life of the oil and gas lease.
06. How is my interest calculated?
Your decimal is calculated as illustrated in the example below: mineral interest × royalty × (your acreage included in unit divided by total acreage of unit) or: 1/6 × 1/8 × (30.35 ÷ 638.34) = .00099052
07. What is an “owner number” and what is its purpose?
Southwestern Energy assigns each of its interest owners a unique owner number for internal identification purposes. Please include your owner number when communicating or corresponding with Southwestern Energy Company.
08. When are checks issued?
Southwestern Energy typically issues checks on the 25th of each month. Please allow time for postal delivery.
09. What should I do if I do not receive my royalty check?
Due to potential postal delays, a check may arrive a few days late. If your check is more than two weeks late, please contact Southwestern Energy. A frequent reason for not receiving a royalty check is that your account has not reached its “minimum pay” or “minimum suspense” status. Southwestern remits revenue to you once your account balance exceeds $100, or at year-end, whichever comes first. Occasionally, payments are held due to title matters that create uncertainty as to ownership, such as notice of death, change of address, transfer of property, assignment of interest, or legal dispute. Payments due are accumulated and released when the matter affecting ownership has been resolved. Inquiries regarding suspense balances should be made in writing to Southwestern Energy’s Division Order Department. See contacts for address.
10. How do I contact Southwestern Energy?
You may e-mail, write, or call Southwestern Energy at the address or phone number listed in the Contacts section of this website.
11. How do I change my address?
Please promptly notify Southwestern Energy of any change in your mailing address. This notice must be in writing and signed by you or your official representative. Please include your name, owner number, Social Security number, old address, and new address, including the zip code. For your protection, address changes are not accepted by telephone. Southwestern Energy will accept address changes via its website, contingent upon the owner being clearly identifiable in the e-mail address.
12. How do I change my name in SWN’s records if I get married or divorced?
Please provide Southwestern Energy with a written request to change your name. Your request should include your old name as it appears in our records, your new name, and a court certified copy of the marriage certificate or divorce decree. In the event your divorce is not finalized, you should state whether you want your payments to continue under your old name or whether you want your payments suspended until the divorce proceedings are complete.
13. How do I add my spouse to my account?
You must file a deed, assignment, or other instrument conveying title in the interest to you and your spouse in the real property records of the county or parish in which the interest is located. You must then provide us with a certified copy of the instrument to add your spouse to your account. In the event this transaction is not completed and the instrument has not been signed and recorded, you must advise us in writing if you want your payments suspended until the transaction is completed and you have provided us with a certified copy of the instrument.
14. What happens if an interest owner passes away?
If the deceased interest owner left a will and the will is being probated, you should provide us with certified copies of the death certificate, Order Issuing Letters Testamentary, Order Admitting Will to Probate, and final decree or judgment distributing the estate. If the estate is not probated or the owner dies without a will, you should provide us with a certified copy of the death certificate, a copy of the will (if available), and a completed Affidavit of Heirship recorded in the county or parish where the interest is located. The Affidavit of Heirship must be completed by a disinterested party and signed and sworn in the presence of a notary public. A “disinterested party” is someone who is not an heir of the decedent, though the disinterested party may be from the same family. The attached Corroborating Affidavit must be signed by someone NOT a member of the decedent’s family, and also must be signed and sworn in the presence of a notary public. (See Affidavit of Heirship, Address Changes, Ownership Transfers, or Death of owner.)
15. What documents are required if I buy or sell an interest in a property?
You should provide Southwestern Energy’s Owner Relations Department with a certified copy of the deed, assignment, or other instrument of conveyance properly recorded in the county or parish in which the property is located. (See Contacts Us section to the right.)
16. What do I do to transfer my ownership to someone else?
The purchaser must file a deed, assignment, or other instrument conveying your title in the interest in the real property records of the county or parish in which the interest is located. The purchaser must then provide us with a certified copy of the instrument, along with a Social Security number or tax identification number, address, and daytime phone number. In the event this transaction is not yet completed and the instrument has not been signed and recorded, you must advise us in writing if you want payments suspended until the transaction is completed and we have been provided with a certified copy of the instrument.
17. How do I notify Southwestern Energy of a change in trustee?
You should provide us with a copy of that portion of the trust instrument that identifies the successor trustee, its duties and powers, and the circumstances leading to the trustee’s replacement. You should also provide us with the successor trustee’s address.
18. When are royalty payments suspended?
For your protection, payments may be suspended in the event of a title dispute, assignment of interest, notice of death, transfer or sale of property, or unknown address. You can prevent such an inconvenience by promptly notifying us of any change regarding your interest.
19. Why does my royalty payment sometimes vary from month to month?
Many factors contribute to your payment. Changing market conditions may cause fluctuations in commodity prices on a monthly basis, while mechanical or operational problems or routine maintenance may temporarily affect production and cause downtime. Also, over time, production volumes from an individual well will experience a natural decline. So, while this may be offset with additional wells being drilled on your property, the decline in production volumes from individual wells is inevitable. Also, regulatory or contractual changes or seasonal conditions can affect the amount of your payment. If you have reason to believe an error in payment has occurred, please contact us at the e-mail address or phone number provided on the contacts page.
20. Why are adjustments sometimes made to my payment?
Southwestern Energy strives to disburse revenues in accordance with each owner’s oil and gas lease and all statutes and regulations of the state in which the interest is located. In the event of an error or discrepancy in your payment, we will make the appropriate correction and an adjustment to your payment may result. For instance, we may receive adjusted production figures or adjusted pricing from a transporter. An adjustment to your royalty payment might then be required to ensure that accurate payment is made. Each state has a statute of limitations that governs how far back in the past a company can make such payment adjustments. Please remember that adjustments may sometimes be in the royalty owner’s favor.
21. Why is backup withholding deducted from my revenue check?
You must provide us with a valid tax identification number or Social Security number for reporting and identification purposes. Otherwise, the Internal Revenue Service requires that we withhold 28 percent of all revenues until this information is provided.