Frequently Asked Questions
Reconciliation vs. Forensic Audit — and How Shannon Springs Fits In
The royalty software industry uses the word “audit” freely. Before anything else, it is worth understanding exactly what that word means in two very different contexts — because the distinction determines whether a discrepancy can be identified or actually recovered.
What is the difference between a reconciliation and a forensic audit?
A reconciliation compares one operator document against another operator document. A check stub is matched to a division order. Reported production is matched to reported volumes. A missing payment is flagged because the expected entry did not arrive. This is genuinely useful — it catches administrative errors, routing failures, and obvious omissions.
A forensic audit does something different: it independently verifies operator-reported data against sources the operator does not control. State regulatory production filings are compared to what the operator claims to have produced. Published market indices are compared to the price the operator claimed to have received. Your specific lease language is read to determine whether each deduction is legally permitted — not just whether it follows the operator’s internal accounting convention. The output is structured as evidence, not a report.
What royalty management platforms do
Compare operator-provided documents against each other to catch discrepancies within the operator’s own ecosystem.
- Check stub vs. division order decimal
- Reported production vs. check stub volumes
- Expected payment vs. payment received
- Portfolio summary for financial reporting
What Shannon Springs does
Cross-examine operator reports against independent external sources to determine whether the underlying data is accurate and legally compliant.
- Operator volume vs. OCC / RRC regulatory filings
- Operator price vs. published market index (same month)
- Deduction codes vs. your specific lease language
- Severance tax rate vs. current statutory rate for your well type
- NGL component yields vs. processing plant statements
- Division order decimals vs. courthouse title records
Royalty management platforms say they do “auditing.” What do they actually mean?
The better platforms offer real value at the reconciliation layer. They pull revenue statements from a large network of operators automatically, flag when a payment is missing or below a threshold, compare check stub volumes to division order entitlements, and produce annual income summaries that an accountant can use. For a large portfolio with many operators, this aggregation alone saves substantial administrative time.
When those platforms describe a “lease audit” or “decimal verification,” they mean a comparison of what the operator has reported in their system against what the operator has on file in their division orders. That comparison is useful. But it rests entirely on data the operator provided — so if the underlying production volumes are understated, or the price reported reflects an affiliate sale at below-market rates, or a deduction is improper under the lease, the comparison will not catch it. There is nothing in the system to compare it against.
Shannon Springs uses reconciliation-platform exports as a starting point, not an endpoint. If you already have that data organized, it accelerates our work significantly. The forensic layer adds the external cross-references that reconciliation platforms are not designed to perform.
How do the two approaches compare feature by feature?
| Royalty Management & Reconciliation Platforms | Shannon Springs Forensic Audit | |
|---|---|---|
| Data source | Operator-reported: check stubs, division orders, revenue statements | Independent: state regulatory filings, market indices, lease documents, courthouse records |
| What is verified | That the operator paid what their own records say they owe | That what the operator's records say is factually and contractually accurate |
| Catches missing payments | Yes — strong alerting when expected payment does not arrive | Yes — plus identifies systematic underpayments that do arrive but are calculated incorrectly |
| Catches volume underreporting | Only if the operator's own reported volume differs from the division order entitlement | Yes — by cross-referencing operator-reported volume against OCC / RRC regulatory filings |
| Catches affiliate pricing | No — the reported price is accepted as the sale price | Yes — by comparing reported price to published market indices for the same month and delivery point |
| Lease-specific deduction review | Compares to standard division order terms; does not read your specific lease language | Each deduction code is tested against your specific lease clauses to determine if it is legally permitted |
| NGL pricing and yield | Typically not analyzed at component level | NGL components (ethane, propane, butane, gasoline) analyzed against Mont Belviëu indices and plant statements |
| Pooling / regulatory monitoring | Some platforms surface filings; few model election alternatives | OCC / RRC filings monitored; election options modeled against production analogs before the deadline |
| Output | Dashboards, payment history, income reports, discrepancy alerts | Forensic Defense Dossier: specific findings, dollar estimates, lease citations, and evidence structured for an operator demand or legal action |
| Cost structure | Ongoing subscription — annual fee regardless of findings | Engagement-based; continuous monitoring is low-cost until a specific discrepancy is confirmed |
| Independence | Serves both operators and mineral owners; operator network is a core product feature | Retained exclusively by the mineral owner; no operator relationships, data-sharing agreements, or industry referral fees |
The two approaches are complementary, not competing. Reconciliation platforms are excellent at organizing and summarizing what you have been paid. Forensic auditing is the independent verification layer that determines whether what you were paid was correct.
When does a forensic audit specifically make sense?
1. Funding a mineral trust. Before you convey an interest into a trust, we verify what you are actually conveying: confirmed acreage, correct decimals on all division orders, active lease inventory, and a 12–24 month remittance baseline. A trust funded on incorrect data inherits every error already attached to the asset.
2. Checks declining without an obvious production reason. When the decline in your check is steeper than the well’s production curve warrants, the difference is usually a deduction that was quietly introduced or a decimal that was quietly adjusted. Neither will be caught by a reconciliation platform unless the operator’s own records reflect the change.
3. Receiving a pooling notice. A pooling order carries an election deadline, typically 30 days after the order is issued. Missing it means the OCC assigns the minimum royalty rate by default — a permanent loss for the life of the well. We model all available election options against production analogs so you file the right election before the window closes.
4. Inherited interests with no prior professional oversight. When an estate settles and royalty payments have gone unexamined for years, the recoverable backlog can be substantial. Most states limit retroactive royalty claims to 3–5 years from each payment date — but only if the claim is filed in time.
What does Shannon Springs not do?
We are a forensic accounting and analysis practice. We are not attorneys, trustees, landmen, brokers, or appraisers. We do not set up trusts, buy or sell minerals, negotiate leases on your behalf, or represent you legally with an operator. We do not manage funds or hold assets.
Our deliverable — the Forensic Defense Dossier — is an analytical and documentation package. It is designed to be used by you, your attorney, or your CPA to initiate a formal demand or take legal action. Independent legal counsel is strongly recommended before any operator demand is made.
We are also not a replacement for a reconciliation platform. If you need centralized document storage, automated revenue delivery from a large operator network, and year-end income summaries, those platforms do that job efficiently. Shannon Springs adds the independent verification layer that determines whether what those summaries are reporting is actually accurate.
Does this apply to horizontal wells and modern drilling technology?
Yes — and more so than with conventional vertical wells. Horizontal drilling doesn’t create new types of royalty errors; it multiplies the existing ones. Larger pooling units (640–1,280 acres vs. 160 acres), far higher production volumes, and complex cross-unit allocation decisions all mean that every percentage point of error carries a much larger dollar consequence.
There are issues specific to horizontal development that reconciliation platforms are not designed to catch: wellbore allocation across multiple spacing units (often based on a proprietary operator model with no public benchmark), multi-zone commingling where different formations have different owners and royalty rates, and NGL-rich shale wells that produce large volumes of high-value liquid components subject to affiliate pricing.
Emerging technologies introduce additional questions: CO₂ sequestration rights, geothermal development, and lithium extraction from produced water are all testing whether existing leases and mineral deeds cover activities that weren’t contemplated when the documents were written. Those questions begin with the same lease-document review that underlies every forensic audit.
Read the full article on horizontal drilling and the forensic audit gap →
How do I get started?
The initial inquiry takes about five minutes. Tell us the state and county, the operator names, and what has prompted your concern. We will respond within one business day with a scope outline and a fixed-fee proposal.
No documents or attachments are needed at the inquiry stage. After engagement begins we provide a secure intake link for document upload. Nothing passes through public email.