Recently inherited a few oil and gas leases. Both working and non working. Royalty etc. Those of you in business how do you set up files to track each? By county, well number, division order? It seems I am getting mail weekly with producers changing and different companies sending checks etc.
Also division orders will be changing due to other recent deaths in family.
How do you keep it all clean and understandable? thanks

The same way the operators do - Microsoft Excel.

set you up a spreadsheet

columns across the top for each month
rows grouped by lease (division order lease number) with Gross income - Severance Tax - net for checks received and Lease operating expense - IDC - Equipment - Other - for expenses paid

groups for the royalty interest separate from Working Interest

working interest stuff will end up on Sch C and royalty stuff on Sch E - so don't worry about matching royalty income on Lease ABC with WI info for the same lease

However, oil income from one lease WI and Gas income from that lease will be added together to go with operating expenses

you could setup a quickbooks chart of accounts much the same and use the "Class" in QB to designate the leases

use cash basis - production and expense from Dec 2013 received or paid in Jan 2014 is 2014 income and expense - that should be how their 1099s will be totaled

ps

get an oil & gas knowledgeable CPA to help you at tax time, there are some significant and complex depletion calculations and depletion benefits for inherited properties

[This message has been edited by TheSheik (edited 6/2/2014 11:46a).]

Definitely get a CPA knowledgeable within the oil and gas tax laws. I keep up with a Quickbooks account on their server so at tax time they can access all my records. In the past, have kept it on my own server then sent them the quickbooks file for them to do DD&A, losses, etc. Haven't done it the excel file way... always been a fan of Quicken / Quickbooks. Personally, depending on the number of wells and all I would look into forming an LLC to run the properties through.

Also, the best way to track wells are on their API number which will not change when the operators change. In Quickbooks, I set them up using their well name / number but if you ever wanted to get into programs that can do analysis on the remaining reserves, cash flows, etc. you will find that importing data using the API number is the easiest and fastest way to import and find wells. Owning and being in charge of mineral / lease interests can be a cumbersome job to keep up with the day to day accounting.

Malibu has the right idea with API numbers. Every number is unique to a specific well and will not change over time.

Thanks to all!

It can be a real headache. I personally have a custom built inventory management system that tracks permitting and production so I can be pro active in making sure I am being paid correctly. I don't have to wait for a DO or Check and then fix it after the fact. If you don't want to deal with it and you or the other heirs would rather monetize the interest please contact me.

Is that a software that is off the shelf or did you build that yourself?