Frequently Asked Questions

Revenue will be paid only after it reaches $100.00 or as required by applicable state statute.  You may make a request in writing to receive your revenue when it reaches $25.00.  Owners who have less than $100 but more than $1 for the year will receive a check in November.

Executed Division Orders must be received five (5) business days prior to the check run in order for the revenue to be released.  If your Division Order is received after this time, your check will not be released until the following month’s check run.

You must fill out and follow the instructions listed on our form. 

Direct Deposit Enrollment Form

Yes, please contact our Accounting department.

Checks are issued at a minimum of $100 every month. We also have an annual check run in October for owners owed more than $10 who did not accumulate the minimum of $100 during that year.

Natural gas and oil revenues are generally paid one to three months after the actual production date, in accordance with state regulations and lease terms.

If you have not received your check and have waited 15 business days from the date the check was originally mailed, please contact our Accounting department. 

If you lose your check, please contact our Accounting department so that we may void and re-issue the check at our next check write date.

Yes. Many factors contribute to your payment, such as market conditions, fluctuating commodity prices, regulatory or contractual changes and production volumes.

Yes. Royalty accounts are subject to adjustment, either upward or downward. Adjustments on your check detail can be identified by a positive and negative entry listed under the “Your Net” column on your revenue check. The negative entry will indicate what was previously paid to you on a prior royalty check. The positive entry right above it will indicate the amount that should have been paid to you. The difference is the adjustment to you for that specific production month. There are many factors that may result in a prior period adjustment, such as:

• • Revised production statements from the property operator
  • Revised plant statements from a plant operator
  • Corrected data received after an unexpected operational change (often due to a mechanical failure that interrupts normal operations or a major weather event)
  • Revised pricing information from third parties
  • Revised allocation statements or pricing information due to audit findings
  • Accounting errors
  • Retroactive tax incentives provided by government authorities

A discrepancy may be identified several years after the original accounting for a given production month, and because many parties have input into the accounting process, there may be multiple revisions over any period of time.

Yes. Royalty payments are dependent on production from wells. The well(s) you are paid from may be shut down for maintenance or may stop producing. There is no guarantee on the life of a well or the amount or frequency of revenue payments.

You will generally not be notified of adjustments or a stop in payment; however, there are some exceptions.

Crude oil and natural gas are commodities, and their value is subject to daily swings in the marketplace. Vernon E. Faulconer, Inc. continually negotiates to get the most favorable prices possible.

A royalty owner shares in production revenues, while a working-interest owner shares in both production revenues and development and operating expenses.

The basic formula for calculating your decimal interest is to take the number of mineral acres you own, divide that by the number of acres in the unit (listed as the property description on your division order) then multiply by the royalty rate in your lease. However, there are many variations in this formula. Should you have any questions, please contact our Division Order Department for more information.

(Acres you own / Total acreage in the unit) x Royalty rate stated in your lease = Your Decimal Interest

Vernon E. Faulconer, Inc. regrets that we are unable to provide personal ownership research. Any information on file with Vernon E. Faulconer, Inc. would be specific to Faulconer’s operated production, which may not be an accurate representation of all your ownership in the area.

You might consider hiring a professional landman or attorney to undertake the research required to resolve your inquiry, or you may contact the county clerk or the tax assessor/collector’s office for information regarding your ownership.

Yes. Royalty interest owners receiving more than $10, and working interest owners receiving $600 or more annually will receive an IRS Form 1099-Misc by January 31 of the following year. The income reported to the IRS is your gross income prior to any other deductions or taxes. The 1099 will also list any state or U.S. withholding amounts deducted from your revenue checks. You may also receive an annual property tax bill (Ad Valorem Tax) from the county (or parish) in which your well(s) are located.

Ad Valorem taxes on minerals are levied at the county level. Ad Valorem is Latin for “according to value.” In Texas (and in some other states), this tax becomes payable only when minerals are producing (as opposed to non-producing), and are billed and collected once per year. Mineral interests are classified as real property, and are taxed based on the appraised fair market value. In its simplest form, fair market value is the price a willing buyer from the open market will pay for a mineral interest within the currently prevailing market conditions.

A severance/production tax is a state tax levied against both royalty and working interest owners on their pro rata share of oil and gas production. State governments set owner severance tax rates and levy the tax when natural resources such as oil and gas are “severed” from the earth. In addition, county governments render and collect a yearly “Ad Valorem Tax” on producing minerals in many states. Owners are usually assessed and billed annually directly from the county where the well(s) are located.

No. You will receive a 1099 at the end of the year to review with your tax preparer.

Royalty owners who received $10 or more and working interest owners who received $600 or more in the calendar year will receive a 1099. We mail 1099s on or about January 31 of the following year. The income reported to the IRS is your gross income prior to any other deductions or taxes. The 1099 will also list any state or federal backup withholding amounts deducted from your revenue checks. The 1099 can also be used to report state income tax.

1099 forms are mailed out annually by January 31st of each year.

The 1099 tax form shows your GROSS amount before taxes and other deductions as required by the IRS. The royalty checks are the NET amount after taxes and deductions.

This can occur because ownership between family members may not be equal. Some family members may own interest in other properties in addition to those commonly owned. Different payments can also occur due to title issues. Thus, payments are held in suspense until the issue can be resolved.

Royalty payments may be suspended until certain conditions are satisfied. Payments can be suspended due to a missing Tax ID, insufficient address, notice of death, lack of title or documentations confirming ownership or disputes.

Please contact Vernon E. Faulconer’s Accounts Receivable department at [email protected].