Pearson Watson Millican and Company - Consultants • Engineers • Experts

Royalty Disputes

Canadian Natural Gas Liquids

Advised the government of Canada on the reasonableness of a formula used to allocate natural gas and natural gas liquids production revenue at processing facilities. Compared allocations to arm's length third-party gas processing agreements and calculated the recoveries of natural gas liquids and the composition of residue gas streams at hydrocarbon dew point temperature and pressure.

Processing Dispute

Assessed the profitability of a proposed natural gas processing plant to recover NGL from a retrograde condensate reservoir in Louisiana. Identified and compared third-party off-site processing proposals with options for on-site processing. Developed cost of service calculations to assess condensate pipeline tariff.

Natural Gas Royalty Litigation

Evaluated the design and historical capital costs of a natural gas pipeline system in western Oklahoma. Reviewed system material balances and operator's natural gas measurement practices.

Market Value of Natural Gas

Determined the reasonableness of royalty payments for natural gas by comparing available arm’s-length contracts, pricing, and actual costs of gathering, compressing, and processing the gas.

Settlement Hearing

Testified on behalf of an independent producer and processor as to the fairness of a proposed natural gas agreement, which was negotiated in the settlement of a class action lawsuit by royalty owners in the Fort Worth Basin.

Expert Testimony

Assisted a major oil company in royalty litigation by demonstrating that plaintiffs had used inappropriate pricing assumptions.

Beginning with the deregulation or "unbundling" of the natural gas pipeline industry in the 1980s, the valuation of natural gas and NGL for royalty purposes has become a contentious issue between producers and royalty interest owners.

This trend began with affiliate transactions that became necessary as traditional sales to pipelines ended, and the trend accelerated with the growth of an independent midstream market for transportation, processing, and marketing services.

Pearson Watson Millican & Co. consultants have provided expert testimony on natural gas market value and net proceeds. We have also testified on the reasonableness of post-production costs and processing cost allowances, and the fairness of percent-of-proceeds agreements.

101 E. Park Blvd., Suite 807, Plano TX 75074 | Phone: 972.578.7980 Fax: 972.578.7986
Pearson Watson Millican & Company © 2008-2009