We received a Division Order from Marathon Oil requesting we "certify the ownership of our decimal interest in production or proceeds . . . " Our 3-year lease with Newfield expired this past September and was not renewed. Does anyone know if drilling is going on in this area? Any suggestions, help, explanations, etc. would be appreciated. Should we sign and return this document? Thank you!
If you got a division order, it means a well has been drilled on your property. Congratulations.
Moeller 1408 1-16MH. You are now held by production and your lease is in what is called the secondary or productive time frame which can last for days or years. In this case, years hopefully. The well was completed on September 22, 2016 and they have to pay you six months after the month of first sales which was late September. So March or April time frame.
The division order is a contract for sales and they are verifying that you are the correct owner and that you agree that your decimal amount is correct. You should see the name of the well on the Division Order. It should be on the NADOA approved form. It should have the words similar to" this Division Order does not change any terms in the lease". If not, then we need to get that fixed for sure!
The formula for the decimal interest is:
net acres/spaced acres x your royalty x % perforations in your section. I this case, the well was spud in Sec 21, but most likely only perforated in 16, so that term is 1.00.
For example, if you have ten acres and the spacing was 640 (which it is here) and a royalty rate of 3/16ths, your decimal would be 10/640 x .1875 x 1.00= 0.00292969.
Insert your net acres into the formula. If your answer is what Marathon has, then you can sign the Division Order. Keep a copy for yourself. Send the return one by certified mail with a receipt and clip your receipt to you copy in case you need it in the future.
Thanks so much!