Understanding and auditing your royalty income can be difficult. Practically all royalty agreements have an explicit or implied audit right, yet many royalty holders do nothing to ensure that they receive the full amount to which they are entitled. Often there is a reliance on the producer’s procedures and controls to ensure the completeness of your revenues as the holder.
Wolverine.consulting provides audits of the producer’s payments and deductions to ensure that royalty holders are compensated accurately and in full compliance with mineral leases, operating agreements and applicable regulatory requirements. Our audit process analyses the following:
- Production allocation (volume and measurement)
- Revenue – oil, gas and other hydrocarbon incomes
- Capital – fully deducted
- Exploration expenditure
- Tariffs and freight
- Prescribed royalties
A royalty audit can identify significant additional royalties not timely reported to the royalty holders, these additional royalties most times exceed the cost of the audit. Reasons to perform an audit include:
- To obtain all royalties to which you are entitled
- To induce future compliance by the audited licensee (a licensee is less likely to underreport if the licensor engages in a regular audit program)
- To induce future compliance by the non audited licensees (as they are deterred from underreporting once the licensor is known to have audited others)
- To determine material noncompliance with an existing licensing agreement in order to modify or terminate it
To learn more about our Royalty Audit capabilities and how we can help you contact us here.