Can anyone shed some light on the accuracy of the decimal interest pertaining to our mineral rights given to us by our senior landman from the oil co. who is producing the oil well?

I found this site a few days ago and it has some nice videos on these two topics.

http://www.americanroyaltycouncil.com/ This site www.mineralweb.com also has some very good information. I hope it helps.

Ardis,

You should always check their math. Calculate it out yourself and see if it agrees with their number.

Typically they are correct. Yet over the years I have found several to be wrong. Trying to correct it later on will takes months to correct. Better to ensure it's accurate prior to signing and sending it back.

MT: Good advice on decimal interest calculations. I ran the numbers, helping out my nephews, on a mineral property here in Texas. Sure enough the numbers did not match up. I alerted my nephew who contacted the landman and they found an error that was in favor of the lessee. They then sent them a corrected DO. Also I am currently finalizing the transfer of our mother’s royalty income interests to the beneficiaries and verifying those calculations as well. Mistakes are made. Royalty Owners should verify these calculations.

Watch the wording as well. My sister and I recently received a division order with the correct % but with wording about royalty owners sharing in the cost of marketing the gas. Our lease calls for no deductions. Someone told me how to prepare my own division order which I did. The company accepted it.

thank you for your response–Can you pass on the information of how to prepare my own division order? Was the preparation very difficult?

Nancy Mosley said:

Watch the wording as well. My sister and I recently received a division order with the correct % but with wording about royalty owners sharing in the cost of marketing the gas. Our lease calls for no deductions. Someone told me how to prepare my own division order which I did. The company accepted it.

I have a decimal figure on my minerals from my landman, and a different figure that my sister got after she paid a lawyer in williston,n.dak The decimal interest from the lawyer is much better, so how are we going to tell which one is correct? I know hiring a lawyer is going to be very pricey, so we are confused as to determine which decimal figure is right, WOW any help is greatly appreciated–ARDIS

Eastern MT said:

Ardis,

You should always check their math. Calculate it out yourself and see if it agrees with their number.

Typically they are correct. Yet over the years I have found several to be wrong. Trying to correct it later on will takes months to correct. Better to ensure it's accurate prior to signing and sending it back.

Ardis, if you and your sister have an identical interest in the minerals, then your sister's number and yours would be the same. In order to calculate your decimal interest you need to know three things;

1. Your NET mineral acres under this well.

2. The GROSS mineral acres pooled for this well's drilling unit.

3. Your ROYALTY rate on the lease you signed.

The calculation is straight forward:

First divide your net by the gross. Take that result and multiply by your royalty rate for your interest.

Here are two examples to demonstrate the calculation. You'll need to do this math with YOUR numbers;

40 Net acres divided by a 1280 Gross acre drilling unit equals... 0.03125

0.03125 multiplied by a 15% Royalty rate (0.15) equals... 0.00468750 as the decimal interest.

Another example after changing the numbers (less net acres, but higher royalty), then...

15 Net acres divided by a 1280 Gross acre drilling unit equals... 0.0117187

0.0117187 multiplied by a 20% Royalty rate (0.20) equals... 0.00234370 as the decimal interest.

It is as simple as that.

Just a guess, but a likely source of the confusion may be the GROSS acres used in the competing calculations. Let's say you own 15 Net acres under 320 Gross acres of land. To calculate your decimal interest you use all the Gross acres pooled together for the well's drilling unit, not just the 320 Gross acres where your minerals are. IE... Your 320 Gross acres were combined with another 960 Gross acres for the well drilled under all 1280 acres. You do get a much larger, yet incorrect, number if you calculate it only using your 320 gross acres. That is one possibility as to why the landman and the attorney's numbers differ.

I'd ask the landman for the exact size of this well's drilling unit. In my examples I use a 1,280 acre pooling. Though your minerals may be pooled into a different sized unit. In N. Dakota 640 acres, 1280 acres, and even 2560 acre drilling units are currently being used. This is the most likely reason for vastly different answers.

ardis jackson said:

I have a decimal figure on my minerals from my landman, and a different figure that my sister got after she paid a lawyer in williston,n.dak The decimal interest from the lawyer is much better, so how are we going to tell which one is correct? I know hiring a lawyer is going to be very pricey, so we are confused as to determine which decimal figure is right, WOW any help is greatly appreciated--ARDIS

*THANKS TO ALL WHO ANSWERED MY QUESTION, I FOUND ALL OF THE INFORMATION MOST HELPFUL AND NOW I DO UNDERSTAND MORE ABOUT THE DECIMAL INTEREST AND HOW TO FIGURE IT OUT–THANKS AGAIN ARDIS*

If your mineral acres are like mine they straddle section and well spacing lines. Only the acres pooled for each particular well count.

Here is a link to the professional organization of division order analysts

http://www.nadoa.org/publications.html

Near the bottom of the page is the NADOA Model Form Division Order. You can fill this in (or retype it) with your appropriate information. Compare this with what you are sent. This has "safe" wording including that a division order doesn't change the terms of the lease. Of course it is always best to consult an attorney. My sister is an attorney so it is easy to consult her. Oil and gas is not her specialty but she took a class in it in law school.

We only have "simple" holdings, not complicated poolings and things. Just read your lease carefully and make sure the division order doesn't try to change anything.

ardis jackson said:

thank you for your response--Can you pass on the information of how to prepare my own division order? Was the preparation very difficult?

Nancy Mosley said:Watch the wording as well. My sister and I recently received a division order with the correct % but with wording about royalty owners sharing in the cost of marketing the gas. Our lease calls for no deductions. Someone told me how to prepare my own division order which I did. The company accepted it.