Computing decimal interest

Law & Legal
1

I have a question concerning the mineral interest type of calculation. My siblings, myself, and 3 cousins have about 250 NMA in Section 59, Block 4, about 9 miles north of Pecos. We now have 5 producing wells, and 2 more completed. We have been paid on the 5 wells as “allocation wells,” i.e., the decimal interest is calculated on how many feet the wellbore goes through our area. Each well is paid at a different royalty interest. Just this year we learned how the decimal interest should be calculated, i.e., NMA owned × Royalty Interest (0.25) divided by GMA in the unit (640). In calculating by this method it would be somewhat different than the “allocation” method. I know we cannot do anything about past payments, but can we request (or insist) on the proper method? We also have lateral wells in 2 other sections with less NMAs, and both of them are calculated by the method above. Any help and advice will be appreciated.

Tommy Beauchamp San Angelo

2

Someone in Texas can give the exact formula for allocation, but you are missing a term in the equation. Generally, my understanding is: net acres / unit acres x royalty x allocated percent of the well in your “section”.

Each horizontal well has a certain number of feet that goes through that unit and may go into the next unit if a long well. The royalty stays the same. It is the feet of perforations that change the decimal. That will change with each well since they are different distances with different perforation amounts.

3

I believe allocation generally equals the proportional length of the wellbore under your tract in relation to the overall wellbore length from FTP to LTP. Any length outside of the FTP-LTP range is not considered for allocation purposes, if I’m not mistaken.