Malone Petroleum Consulting

(281)531-1500

 

Reasons for an Oil and Gas Audit

Reasons for an Oil and Gas Audit

The most important thing we firmly believe is for you and your company to become more street smart and to become a much wiser investor and a more informed non-operator, thus protecting your future investments based on your accelerated learning process from the hard knocks of investing and the comfort of joint interest auditing.

What you might suspect may be true and it might not be true - you usually don't really know for sure until you look. An audit gives the operator a very fair benefit of doubt and a chance to explain what appears at first to be something must worse; you never want to rush heedlessly or needlessly into a lawsuit when an audit can conveniently honestly resolve all issues for you. Not all operators are bad! We have very objectively seen some great operators that we personally would love to invest our meager funds. We have clients who are good operators and we have worked together for many years - they are good people! When we audit operators and they see we want adherence to the contract, but we are very fair and objective; so, the operators end up wanting us to do their audits too because they know we, as their ambassadors, will treat their relationships professionally and fairly as we have with them.

However, 100% of us must admit that there are always a few operators out there who are more than willing to ruin things and give the oil and gas industry a bad reputation for all the rest of the good operators in the industry, but you are not 100% sure. As we all know, opportunity may knock only once, but temptations always lean on the doorbell. Some operators will get tired of non-operator calls and suggest they audit; deny their exceptions and leave the non-operator's only recourse nothing but to sue the operator who has a very strong legal department. Obviously, there are many times there are cases where some investors and non-operators might think they have been overcharged by the operator; the joint interest bills are too high; the joint interest bills make no sense; the joint interest bills are too big and thick; the drilling costs are too high; the completion costs are too high; the lease operating costs are too high; there might be suspected fraud or conversion of funds; the AFE's were overspent; the operator did not submit supplemental AFE's; the payout is overdue; the operator violated the contract; the operator is cheating; your attorney is looking for a good auditor; revenues are too low; the operator is deducting expenses not allowed by the lease agreement; the operator is charging items covered by overhead, the operator will not return phone calls; the operator is using their own subsidiaries to make unfair profits, the gossip is you have a crooked operator, kickbacks are suspected; or even the operator stole the well (which is very easy to do and is done); the operator doesn't know what he is doing; the operator is refusing to cooperate; the operator is refusing to communicate with the Non-Operators; the operator lost the well; there was an endless fishing job; the well blew out; the operator has a conflict of interest; the operator had to sidetrack the well; the list is endless.

Our job is to listen carefully, patiently and objectively; learn from you what your concerns are; think it through and come up to speed quickly to hopefully help you verify and resolve your issues with the operator. In the past, we have elected to NOT audit an operator even after being authorized to do an audit since we have thought that both the operator and the non-operator issues can be better served and/or resolved without an audit. Like people, each and every well has its own personality; each and every operator is different; each and every situation is different and important to our concerned client, as well as it is to us too.

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