I am new to this forum and need advise. I have inherited mineral rights that have been in family for around 80 years. This 40 acre track in Katy Tx. originally had 3 wells . Started with Humble Oil ,to Exxon, Forest oil and Now Hilcorp. The royalties have always been paid by track decimals until Hilcorp took over. The only division order I can find was with Exxon. Now I receive statements with 26 wells on it and it is being paid in units. These decimal are much lower and pay a lot less than ever before. Does this sound like wells were pooled. And if so what legal ground do I have in this being done. No one ever contacted me or sent paper work. Will
Most likely the wells have been in units for all these years. The 40 acres may have been split between units or there may be units on the same minerals, each at different depths. When royalties are paid on the tract basis, the royalty decimal is calculated on your interest in the tract, but the volumes and gross sales are reduced to the percentage of your tract to the unit. For a simple example, if you own 100% of minerals in 40 acres at 1/8 royalty, then your royalty DOI is 1/8 = 0.12500. If the 40 acres is included in a 400 acre unit, then your unit decimal is 1/8 X 40/400 = 0.012500. This is because the 40 acres are 10% of the total 400 unit acres. If Exxon paid you on your tract decimal of 0.12500, then it will only report 1/10 of the production and sales on your check stub. If Hilcorp is paying on the unit decimal, then it will report 100% of the production and sales. So if the unit produces 100 bbl which are sold for $50, then total unit sales are $5,000. Exxon will report 10 bbl and $500 sales X 0.125 = $62.50 royalties. Hilcorp will report 100 bbl and $5,000 sales X 0.0125 = $62.50 royalties. So you would be in the same position. Some units contain multiple wells and the volumes are combined for reporting to the RRC. Again, Exxon may have reported all the wells together as one line on your check. Hilcorp may be listing each well within the unit on your check. Finally, production volumes fall over time and some older wells will cease producing. Gas prices have fallen substantially in the last couple years, so that will hurts. Oil prices have also varied widely in the last few years. If you post the name of the wells or unit(s), then you can get more specific responses.
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Thanks for the info. It sound like you have a lot of experience in this field. These royalties are actually my wife’s of forty two years. I see that you are from Houston area. My wife and I graduated from Aldine High in 1980. and Move to Missouri about 30 years ago. would you be willing to look at power point of info that I have put together of these royalties. Thanks Will