I'm new to the group. I'm 1/3 owner of a 1/6 royalty interest on a producing property located in Uintah County, Utah. I just (finally) received a division order from the producer, but I question the decimal interest number they provided. They show a decimal interest number of .048611. As I mentioned, I'm 1/3 owner of a 1/6 interest. By my own calculations, 1/6 interest should be a decimal interest of .16666 and a third of that should be .0555. My lease clearly states that I'm I am owner of 1/3 of the surface and mineral rights. The .048611 number they provided is closer to 1/3 of 1/7. Am I missing something? Should I contact the company, and in what way? I don't want to unnecessarily delay royalty payments, but that small number could make a large difference over time. BTW, there are 4 other owners besides myself and they each own 1/6 of 1/6. The number they received is .02430, which comes out to exactly half of my interest as it should, but not on 1/6. Thanks so much for any advice or suggestions.
Does 'your' mineral interest make up 100% of the acres in the unit? If not, then that could explain the additional dilution; for example if your interest only covers 875 acres in a 1000 acre unit, then that would almost explain the given number exactly.
We collectively own 115 acres and 100% of the mineral rights on those acres. The producer has created 640 acre drilling units on which they can place 16 wells. Our property at present has 1 producing well with plans for 2 more. As far as I know, all of our 115 acres are contained within the drilling unit…at least they have never notified us differently.
Mr. MacKnight, never expect an oil company to inform you of anything. Legally you are bound to keep a close eye on your interests and the oil company has no duty towards you that is not in state/federal law or in your lease and the government does not keep up with oil companies very well.
Something isn't correct with the numbers. You said that you have a 1/6 interest (collectively) but 115 is not 1/6 of 640 (106.66667 is), so the unit size is a little different or the 1/6 is not correct. Regardless, I will show you your decimal using the 115 acre number and 640 for the unit.
You have 38.33333 acres (1/3 of 115)
38.33333/640 (unit size)= 0.0598958
0.0598958* 0.1875 (lease royalty, assuming its a 3/16 lease)=0.01123046 = unit net revenue interest.
If you participated in the well instead of leasing you would have the 0.0598958 number. The number of 0.048611 equates to a lot more acres in a 640 acre unit (assuming it's leased). The NRI for your families entire 115.00 acre interest is 0.0336914 in a 640 acre unit leased at 3/16.
It almost sounds to me like you are a leasehold owner. If you had 1/3 of a 115 acre lease, leased at 3/16 then it would look like this.
38.33333/640= 0.0598958*0.8125=0.0486653, which is fairly close to their number.
Thanks everyone who has responded to my question. I think I may be more confused now than when I asked it! I think that I will have my attorney contact the land man with my question.
Scott Pipkin said:
Something isn't correct with the numbers. You said that you have a 1/6 interest (collectively) but 115 is not 1/6 of 640 (106.66667 is), so the unit size is a little different or the 1/6 is not correct. Regardless, I will show you your decimal using the 115 acre number and 640 for the unit.
You have 38.33333 acres (1/3 of 115)
38.33333/640 (unit size)= 0.0598958
0.0598958* 0.1875 (lease royalty, assuming its a 3/16 lease)=0.01123046 = unit net revenue interest.
If you participated in the well instead of leasing you would have the 0.0598958 number. The number of 0.048611 equates to a lot more acres in a 640 acre unit (assuming it's leased). The NRI for your families entire 115.00 acre interest is 0.0336914 in a 640 acre unit leased at 3/16.
It almost sounds to me like you are a leasehold owner. If you had 1/3 of a 115 acre lease, leased at 3/16 then it would look like this.
38.33333/640= 0.0598958*0.8125=0.0486653, which is fairly close to their number.
Just wanted to provide an update that my question was answered with a call to the company's division analyst. It appears that the one producing well on our property is on a 40 acre tract, with 35 of those acres lying within our property boundaries and the other 5 acres within another owner's. So, 35/40 = .875 * .05555 (my 1/3) = .048611. Thanks to all who responded to my question!