Is it common to have two gas wells on the same division order? They are in the same unit but I don’t understand how the decimal intetest can be calculated that way. Any advice?
Hi, Debi -
Your decimal interest is your interest in the entire unit, no matter how many wells they drill in it.
Various tracts of land are pooled together to make a unit. Obviously, the sizes of the tracts of land can vary. Some may even have interest owners with different percentages of ownership and leases with different royalties reserved in them.
Landmen prepare Title Runsheets (Histories) of the Tracts of land; Attorneys use those Title Runsheets to prepare Title Opinions on the Tracts various tracts making up the unit.
First they prepare a Drill Site Title Opinion, for getting ready to drill a well. After they have drilled the Well (or while they are drilling the well) they prepare a final, Division Order Title Opinion (DOTO), setting out who owns what and who pays for what and who gets paid for what.
Division Order Analysts check all of those figures out and enter the data into a computer program of some sort, setting up what is called a "Paydeck" of every owner's ultimate decimal interest in the unit. That's how everybody gets paid.
I'm sure there is somebody out there who can explain it in greater detail, but that's pretty much how it works.
Hope this helps -
Charles Emery Tooke III
Certified Professional Landman
Fort Worth, Texas
Thanks very much for that explanation, Mr. Tooke.
Thank you very much!!!
Debi -
It is becoming more common for companies to line more than one gas well in the same unit. They provide calculations for each well, because under certain circumstances the companies royalty payment liabilities may be slightly different because of overriding royalty interests, or there may be non-participating royalty interest owners who have not ratified the lease or unit. I can give you a more in-depth explanation on that if you like, just wanted to say that there are circumstances where ownership of two wells in the same unit could be different.
Erin
I've found most Division Order Analysts to be happy to show proof of their calculations. Never hurts to ask.