Investor Distribution Statements: Oil and Gas Example
What is an investor distribution statement?
An investor distribution statement is the document an operator sends each working interest or revenue partner with their payment. It shows, for one period, the revenue earned on each lease, the deductions taken, any amount held back, the partner's decimal interest, and the dollar amount owed, so the partner can check the number without calling.
How to prepare a distribution statement in six steps:
- Close the period. Lock sales, invoices, and stakes for one production month.
- Confirm decimals against signed division orders: NRI for revenue, working or expense interest for costs.
- Total each lease: gross revenue, production taxes, LOE, and any holdback.
- Allocate per partner and round once, at the partner's net line.
- Tie out: the sum of partner nets equals the lease net; note any rounding cent.
- Add prior balances, send the statement with the payment, and keep the backup.
What lines belong on a distribution statement?
| Line | What to show | Backup to keep |
|---|---|---|
| Period and record date | Production month, payment date | Close date note |
| Lease and well | Lease name and RRC or internal ID | Well list |
| Volumes and price | Barrels or Mcf sold, realized price | Purchaser statements, run tickets |
| Gross revenue | Volume x price at 8/8ths | Purchaser statements |
| Production taxes and fees | Severance tax, clean-up fee | Purchaser withholding detail |
| LOE | Total, with categories on the LOS | Invoices, field tickets |
| Holdback or reserve | Amount, reason, expected release | Written approval |
| Partner decimals | NRI and WI or expense interest | Signed division order |
| Partner net | This period | Calculation |
| Previous balance | Any unpaid amount carried | Prior statement |
| Total due | Net plus previous balance | Payment record |
The lease-level detail is the lease operating statement. The distribution statement is the partner's slice of it plus anything carried from earlier periods.
Worked example: three partners on one Texas lease
Hypothetical numbers, chosen so the rounding problem shows up.
Lease facts for October
- Oil sold: 1,400 bbl at $66.50 = $93,100.00 gross
- Royalty burden 3/16 (0.1875), so the lease net revenue factor is 0.8125
- Severance tax at 4.6%: $93,100.00 x 0.046 = $4,282.60
- Oil Field Clean-Up Fee: 1,400 x $0.00625 = $8.75 (rates per the Texas Comptroller)
- Total taxes and fees: $4,291.35, shared by revenue owners in proportion to NRI in this example
- LOE: $14,800.00 at 8/8ths, shared by working interest
- Holdback: $5,000.00 at 8/8ths, approved in writing for a planned rod and pump job, shared by working interest
Partner decimals. NRI = WI x 0.8125 (see how to calculate NRI).
| Partner | WI | NRI |
|---|---|---|
| Operator | 0.50 | 0.40625 |
| Partner B | 0.30 | 0.24375 |
| Partner C | 0.20 | 0.16250 |
| Total | 1.00 | 0.81250 |
Partner B, line by line
- Revenue: $93,100.00 x 0.24375 = $22,693.125
- Taxes and fees: $4,291.35 x 0.24375 = ($1,046.0166)
- LOE: $14,800.00 x 0.30 = ($4,440.00)
- Holdback: $5,000.00 x 0.30 = ($1,500.00)
- Net: $15,707.11
All partners
| Partner | Revenue | Taxes and fees | LOE | Holdback | Net (rounded once) |
|---|---|---|---|---|---|
| Operator | $37,821.875 | ($1,743.3609) | ($7,400.00) | ($2,500.00) | $26,178.51 |
| Partner B | $22,693.125 | ($1,046.0166) | ($4,440.00) | ($1,500.00) | $15,707.11 |
| Partner C | $15,128.75 | ($697.3444) | ($2,960.00) | ($1,000.00) | $10,471.41 |
| Total | $52,357.03 |
Tie-out. Lease net = ($93,100.00 x 0.8125) minus ($4,291.35 x 0.8125) minus $14,800.00 minus $5,000.00 = $75,643.75 minus $3,486.72 minus $19,800.00 = $52,357.03. The partner nets sum to the same figure.
Why round once. If you round every line first, the Operator's revenue becomes $37,821.88 and taxes $1,743.36, so its net becomes $26,178.52, and the three partners sum to $52,357.04, one cent more than the lease. Pick a rule (round at the net line, and assign any leftover cent to the operator or carry it forward), write it on the statement, and use it every month.
Previous balance. Suppose Partner C's September payment was returned because their bank details had changed, leaving an unpaid previous balance of $9,860.25. October's statement shows net $10,471.41, previous balance $9,860.25, total due $20,331.66. Small amounts can also carry forward under a minimum check rule; see minimum check thresholds.
The holdback. The $5,000.00 is cash withheld this period, not a cost. Show its reason and expected use, then show it again when it is spent on the job or released. If the job goes ahead, the partner's share of its cost and payback is worth showing; see workover cost and payback math.
Inputs to gather before you run the numbers
- Purchaser statements and run tickets for the period, by lease.
- Well cost entries for the period, each with an invoice and, for field work, a ticket.
- Signed division orders; any decimal change since last period (see division order basics).
- Production tax and fee amounts withheld by the purchaser, compared to the severance tax rates.
- Written approval for any holdback, with amount, reason, and expected release.
- Current payee address or bank details for every partner.
Cash distributed is not taxable income
A partner's tax reporting follows income and deductions under the partnership agreement or ownership structure, not when cash arrives. Depending on structure, owners may receive a Schedule K-1 from a partnership return (Form 1065) or a Form 1099-MISC. A holdback, a carried balance, or a late check can make cash differ from what is reported. Put one line on the statement saying so, and send tax questions to the partner's CPA.
Distribution statement checklist
- Period, record date, and payment date on the statement
- Each lease shows volume, price, and gross revenue
- Taxes and fees match purchaser withholding
- LOE matches the LOS for the same period
- Holdback shown with reason, approver, and expected release
- Partner decimals match signed division orders; WIs sum to 1
- Rounded once at the net line; partner nets sum to the lease net
- Rounding rule stated
- Previous balances and minimum-check carryovers shown
- Backup filed by lease, period, and document type
Where WellsManager fits
WellsManager keeps the three inputs a distribution needs on the same well record: sales recorded by tank, well costs booked line by line with the vendor and invoice, and each investor's stake with a net revenue interest and an expense interest per well. Change a decimal and the next period's statement reflects it, with the stake history kept.
Close a period and the operating statement shows each investor the net income per lease, the subtotal, any unpaid previous balance, and the total due. Distributions are scheduled per investor and recorded as payments; the money itself moves through your bank, not through WellsManager. Investors can sign in to see their own statements and payment history, and staff get a short written brief per investor before a call.
WellsManager does not draft division orders, verify title, or generate standalone JIB invoices. See operations accounting or get a price for your operation.
Frequently asked questions
What must an investor distribution statement show?
The period and payment date, each lease's volumes, price and gross revenue, taxes, LOE, any holdback, the partner's decimals, the net for the period, any previous balance, and the total due.
How do you calculate a partner's distribution?
Multiply gross revenue and production taxes by the partner's NRI, multiply LOE and any holdback by their working or expense interest, then subtract. Round once at the net line.
Why do partner payments not add up to the lease total?
Usually rounding each line before netting, or decimals that do not match the division order. Round once per partner and assign any leftover cent by a stated rule.
What is a holdback on a distribution statement?
Cash withheld from this period for a known future cost, such as a planned workover. Show the amount, the reason, who approved it, and when it will be spent or released.
How often do operators send distribution statements?
Many independents distribute monthly, after purchaser statements arrive. Whatever the cadence, state the production month and payment date on every statement.
Does the distribution equal a partner's taxable income?
Not necessarily. Tax reporting follows income and deductions, not cash timing. Owners may get a Schedule K-1 or a Form 1099-MISC depending on structure. Their CPA should confirm.
How long should distribution records be kept?
Keep source documents for at least as long as the related tax returns can be examined. IRS Publication 583 explains the periods; your CPA may advise longer.