Revenue Distribution & Accounting Flashcards

In oil and gas revenue accounting, what does the term 'suspense account' refer to?

Answer: Funds withheld from distribution due to title disputes, missing addresses, or unclear ownership

Suspense accounts hold undistributed revenue when there are title questions, missing owner information, or unresolved division order issues preventing normal payment.

Under most state unclaimed property (escheat) laws, how long must oil and gas revenue remain in suspense before it must be remitted to the state?

Answer: 3 to 5 years

Most states require operators to escheat suspended oil and gas revenue to the state after a dormancy period of 3 to 5 years, though the exact period varies by state.

A joint interest billing (JIB) statement serves what primary function in mineral management accounting?

Answer: It allocates and invoices non-operators for their proportionate share of joint operation costs

A JIB (Joint Interest Billing) statement is the monthly invoice the operator sends to non-operators billing them for their working interest share of lease operating expenses and capital costs.

What is the purpose of a 'gas balancing agreement' in the context of revenue distribution?

Answer: To resolve imbalances when co-owners take unequal shares of gas production relative to their ownership interest

Gas balancing agreements govern what happens when co-owners take more or less than their proportionate share of gas production, creating 'overlifts' and 'underlifts' that must be settled.

For federal onshore leases, ONRR requires royalty payments to be submitted by what deadline each month?

Answer: The 15th of the following month

ONRR requires federal royalty payments and production reports to be submitted by the 15th day of the month following the production month.

When calculating the net revenue interest (NRI) for a working interest owner, which formula is correct?

Answer: NRI = Working Interest × (1 – Royalty Rate)

The NRI equals the working interest percentage multiplied by (1 minus all royalty burdens), representing what fraction of revenue the working interest owner actually receives.

A 'take-or-pay' contract in gas sales requires the buyer to:

Answer: Pay for a minimum volume of gas whether or not they actually take delivery

Under a take-or-pay contract, the gas purchaser must pay for a minimum contracted volume even if they choose not to take physical delivery of the gas.