Oil and Gas Lease FAQ

  1. What is an oil and gas lease?
  2. What are royalties?
  3. What is "clearing title?"
  4. What is a division order?
  5. What are some of the more common interest types shown on my check and what do they mean?
  6. What is an “owner number” and what is its purpose?
  7. When are checks issued?
  8. What should I do if I do not receive my royalty check?
  9. How do I contact P3?
  10. How do I change my address?
  11. How do I change my name in P3 Energy Service's records in the event of a marriage or a divorce?
  12. How do I add my spouse to my account?
  13. What happens if an interest owner passes away?
  14. What documents are required if I buy or sell an interest in a property?
  15. What do I do to transfer my ownership to someone else?
  16. How do I notify P3 of a change in trustee?
  17. When are royalty payments suspended?
  18. Why does the amount of my royalty payment sometimes vary from month to month?
  19. Why are adjustments sometimes made to my payment?
  20. Why is backup withholding deducted from my revenue check?
  21. Where do I send correspondence?

Answer 1:

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.

Go back to top

Answer 2:

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 P3 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 8th of each month. However, several things may affect the issuance of an owner's first royalty check. Also, checks are issued if the owner's total royalty is greater than $25. If an owner's total royalty is less than $25, a check will be issued once a year (Please 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 distribution will apply.

Go back to top

Answer 3:

Before obtaining an oil and gas lease, drilling a well, or making payments under a division order, the operator will want 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 will know 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 specific county. The opinion will often recommend that curative instruments be completed before the property interest is purchased, drilled on, production revenue distributed, etc. This process could take several months.

Go back to top

Answer 4:

Once title has been "cleared" (i.e., verified by a title opinion) and a producing well has been drilled, a division order is sent to the royalty owners for their signatures. The division order issued by the Land Department sets forth the decimal interest of production owned by each party, their addresses and tax identification numbers or Social Security numbers, and a legal description of the property on which the well is located. Once the royalty owners have signed the division order, they may be put into a "pay status" to begin receiving royalty payments.

Go back to top

Answer 5:

Interest types are represented by a numeric code on P3 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.

Go back to top

Answer 6:

P3 assigns each of its interest owners an owner number for internal identification purposes. Please include your owner number when communicating or corresponding with P3.

Go back to top

Answer 7:

Princess Three Operating, LLC attempts to issue checks on the 8th of each month.

Go back to top

Answer 8:

Due to potential postal delays, a check may arrive a few days late. If your check is more than two weeks late, please contact P3.
    a. A frequent reason for not receiving a royalty check is that your account has not reached its "minimum pay" or "minimum suspense" status. P3 remits revenue to you once your account balance exceeds $25, or at year-end, whichever comes first.
    b. 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 P3’s Owner Relations Department.

Go back to top

Answer 9:

You may e-mail, write, or call P3 at the address or phone number listed in the Contact section of this website.

Go back to top

Answer 10:

Please promptly notify P3 of any change in your mailing address. This notice must be in writing and signed by you or your appointed agent. 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. P3 will accept address changes via its website, contingent upon the owner being clearly identifiable in the e-mail address.

Go back to top

Answer 11:

Please provide P3 with a written request to change your name. Your request should include your old name as it currently appears in our records, your new name, and you MUST include a court certified copy of the marriage certificate or divorce decree. In the event your divorce is not yet 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.

Go back to top

Answer 12:

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 property is located. You must then provide us with a certified copy of the instrument.

Go back to top

Answer 13:

If the deceased interest owner left a will and the will is being probated, we should be provided 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, we should be provided 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 property is located. The Affidavit of Heirship must be completed by a disinterested party, signed and sworn to 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 a family member. A Corroborating Affidavit must be signed by someone who is NOT a member of the decedent’s family, and signed and sworn to in the presence of a notary public.

Go back to top

Answer 14:

You should provide P3’s Owner Relations Department with a certified copy of the deed, assignment, or other instrument of conveyance properly recorded in the county or parish which the property is located.

Go back to top

Answer 15:

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 property 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.

Go back to top

Answer 16:

How do I notify P3 of a change in a 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.

Go back to top

Answer 17:

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.

Go back to top

Answer 18:

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. Also, regulatory or contractual changes or seasonal conditions can affect the amount of your payment.

Go back to top

Answer 19:

P3 strives to disburse revenues in accordance with each owner’s oil and gas lease and all statutes and regulations of the state. 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.

Go back to top

Answer 20:

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% of all revenues until this information is provided.

Answer 21:

Princess Three Operating, LLC
Investor Relations Department
P.O. Box 1983
Henderson, Texas 75653

Go back to top