Understanding Oil and Gas Settlement Statements
What Is a Settlement and Why Does It Matter?
A settlement statement reflects the value of oil and/or gas delivered to a purchaser. This document provides a comprehensive record of production volumes, pricing, and net revenue. These statements serve as the financial report cards for your well's monthly performance from the oil and/or gas purchasers. They supply the essential information enabling the operator to calculate your percentage net revenue check and Joint Interest Billing statement.
Oil Settlements: Converting Barrels into Revenue
Crude oil is measured in barrels (42 gallons), but its value depends on more than just quantity — quality plays a significant role. Several factors determine the price you receive for oil:
Temperature
Oil expands when heated and contracts when cooled. To maintain consistency, all volumes are adjusted to a standard temperature of 60°F.
API Gravity
A higher API number indicates lighter oil, which produces more gasoline and diesel during the refining process, making it more valuable.
Basic Sediment and Water (BS&W)
These are impurities that diminish the value of the oil. The cleaner the oil, the stronger the price.
Benefit to You
Grasping these adjustments helps you understand the factors that may affect your returns by participating in wells that produce higher-quality crude.
Gas Settlements: Earning Revenue for Every BTU
Natural gas is measured in MCF (thousand cubic feet), but its value hinges on its energy content measured in BTUs (British Thermal Units). Key factors affecting gas pricing include:
BTU Content
Gas with higher BTU content delivers more energy per unit, commanding premium pricing.
Processing and Deductions
Raw gas often contains impurities and natural gas liquids (NGLs) that must be removed before sale. Processing fees and transportation costs are typically deducted from gross proceeds.
Market Conditions
Regional supply and demand dynamics influence the price received at the point of sale.
Benefit to You
Understanding these variables helps you evaluate well performance and appreciate the factors driving your monthly gas revenue.
Profit Calculations Made Clear
After gas and oil are sold, our Accounting Department takes the net dollar amount received, divides it by monthly sales volumes, and reports it to you as dollars per MCF on your monthly Joint Interest Billing (JIB) statements.
Benefit to You
You receive a transparent view of your monthly profits broken down by well, helping you monitor performance and make informed decisions.
Shared Ownership Equals Shared Returns
Many U.S. wells have multiple investors, known as working interest owners. As one of these partners, you help fund the well's development, share in monthly production income, pay a portion of operating expenses, and receive proportional revenue from every barrel of oil or MCF of gas sold along with your percentage of the well's operating expenses.
Benefit to You
As production continues, you may be positioned for long-term, passive income tied to tangible energy assets.
Transparency and Confidence
Trilateral Drilling Partners, LLC provides this overview for educational purposes, helping you understand the mechanics behind your investments.