Need help with understanding a Division Order we just received...
We are a nonparticipating owner and I understand that we will receive 12.5% royalties until the costs are recouped. I can verify the decimal interest with that information but should the Division Order state that the decimal interest calculation will be 100 % after costs have been recouped?
Also the deed states we have ownership of a percentage of 320 acres but the oil company uses 640 acres to come to the decimal interest. Why the difference?
Thanks for any advise you can give!
Linda
Linda, the 640 is probably the drill spacing and your decimal interest would be figured from that. The well and bore may not be all under your acres, or it could be, and the operator requested 640 spacing and nobody opposed it and you could have an untapped 1/2 section in the spacing, just waiting for a second well.
Theoretically, (since I don't know where you own and where the well was drilled) none of your acres might be drained by a well in the 640 and if the operator had requested a 320 spacing, you might not have a well. I am on both sides of the equation in ND, with others held by royalty payments from drainage from my acres and I am held with payments from the drainage from the acres of others.
I believe the division order will be based on what you had the instant it was drafted which would be a 12.5% royalty interest. If the operator does not provide it on their own I would demand the payout statement quarterly. The law says you can demand the payout statement and that may keep the operator suitably focused on what you own. You could receive another division order when your well recovers 200% and operating expenses, reflecting your working interest. I hope this helps.
RWK:
Help us or at least me with what I've just read.
First: Why is working interest even a consideration if the folks only have NPRI.
Second: Why would well spacing have anything to do with their royalty calculations. I understand that their royalty would or could be based on the 320 instead of the 640 if there is a 640 acre pool; however, if the 320 acres is the total pool for now, why would the royalty be based on what might happen later on and if the spacing is limited to the 320 for now and these people are being paid based on a 640 scenario, then who's getting or keeping the other 12.5% slice? I'm sure there is a lot more to this than meets the first set of eyes; but, unless thing are really different in ND than they are in Texas, something doesn't make good logic to me.
Thanks
r w kennedy said:
Linda, the 640 is probably the drill spacing and your decimal interest would be figured from that. The well and bore may not be all under your acres, or it could be, and the operator requested 640 spacing and nobody opposed it and you could have an untapped 1/2 section in the spacing, just waiting for a second well.
Theoretically, (since I don't know where you own and where the well was drilled) none of your acres might be drained by a well in the 640 and if the operator had requested a 320 spacing, you might not have a well. I am on both sides of the equation in ND, with others held by royalty payments from drainage from my acres and I am held with payments from the drainage from the acres of others.
I believe the division order will be based on what you had the instant it was drafted which would be a 12.5% royalty interest. If the operator does not provide it on their own I would demand the payout statement quarterly. The law says you can demand the payout statement and that may keep the operator suitably focused on what you own. You could receive another division order when your well recovers 200% and operating expenses, reflecting your working interest. I hope this helps.
Bigfoot, I believe that they [ Linda/ her dad ] actually own mineral acres and they are not an NPRI but a non- consenting /participating mineral owner. This would be Montana, from looking at Linda's home page. Montana differs from North Dakota and both are a far cry from Texas. I know, sometimes you need a scorecard to keep track of the players. I had a leg up because I had replied to Linda a couple times before, and knew a bit about her situation already. Linda said non-participating when I think she should have said non-consenting and I think that threw you off the trail. I hope this clears things up.
Thanks, I had a feeling there was much more to this than we could see from the basic conversations. Still in the dark on some of this explanation; but, I'm O.K. with leaving it as it stands.
Thanks again.
r w kennedy said:
Bigfoot, I believe that they [ Linda/ her dad ] actually own mineral acres and they are not an NPRI but a non- consenting /participating mineral owner. This would be Montana, from looking at Linda's home page. Montana differs from North Dakota and both are a far cry from Texas. I know, sometimes you need a scorecard to keep track of the players. I had a leg up because I had replied to Linda a couple times before, and knew a bit about her situation already. Linda said non-participating when I think she should have said non-consenting and I think that threw you off the trail. I hope this clears things up.
Bigfoot, without going all the way back to the egg. Every acre, no matter where situated in a well spacing in ND or Mt is equal to every other acre, all 640 acres are what would be considered in Tx as drillsite or wellbore tract, but then ND and Mt have forced pooling so you aren't automatically a working interest owner when the well pays out 100% as you would be in Tx for acres that were drillsite/wellbore tract. In ND it's 150% and Mt it's 200% payout. Another nuance is that in Tx only the acres that are drillsite/wellbore tract would be working interest for the non-consenting owner whereas every acre in the spacing owned by the non-consenting owner is considered drillsite/wellbore in ND/Mt. You could have 40 nma tucked away in a corner without a prayer of being drained and still be entitled to royalty and eventually become a working interest in the well.
I'm not fond of socialism but if I have to put up with it in these overlarge spacings, just because I don't like it won't prevent me from trying to find a way to turn it to my advantage. This probably makes things clear as mud.
Wow! Thanks again. Sounds like "big brother" has already grabbed hold of the folks up North. What a scary mess to be involved in or with and we thought the Mafia was the bad guys. Give OB and Hillary and their cronies another few years and we won't have to worry about any of this since they will nationalize anything and everything that even looks like it will give them bucks to throw or give away to their cronies.
I believe that gave me a stomach ache, so let's put this one to bed!
Thanks again.
r w kennedy said:
Bigfoot, without going all the way back to the egg. Every acre, no matter where situated in a well spacing in ND or Mt is equal to every other acre, all 640 acres are what would be considered in Tx as drillsite or wellbore tract, but then ND and Mt have forced pooling so you aren't automatically a working interest owner when the well pays out 100% as you would be in Tx for acres that were drillsite/wellbore tract. In ND it's 150% and Mt it's 200% payout. Another nuance is that in Tx only the acres that are drillsite/wellbore tract would be working interest for the non-consenting owner whereas every acre in the spacing owned by the non-consenting owner is considered drillsite/wellbore in ND/Mt. You could have 40 nma tucked away in a corner without a prayer of being drained and still be entitled to royalty and eventually become a working interest in the well.
I'm not fond of socialism but if I have to put up with it in these overlarge spacings, just because I don't like it won't prevent me from trying to find a way to turn it to my advantage. This probably makes things clear as mud.
Thanks guys for the information! I think I can go forth and I am sure I will probably be back with more questions later!
Thanks again,
Linda
R W K great information about TX ND and MT and the differences between them regarding an issue like this.
Called the oil company and I finally understand the 200% payout...it's on the entire well not just the portion we did not pay up front. But the person I spoke with thought that they did not have to send out a statement on the payouts. Previously you referenced Montana code 82-11-202 which I believe you are speaking of section 2d. So should I call back and simply ask for a monthly statement or should it be in writing?
Thanks so much!
Linda
r w kennedy said:
Linda, the 640 is probably the drill spacing and your decimal interest would be figured from that. The well and bore may not be all under your acres, or it could be, and the operator requested 640 spacing and nobody opposed it and you could have an untapped 1/2 section in the spacing, just waiting for a second well.
Theoretically, (since I don't know where you own and where the well was drilled) none of your acres might be drained by a well in the 640 and if the operator had requested a 320 spacing, you might not have a well. I am on both sides of the equation in ND, with others held by royalty payments from drainage from my acres and I am held with payments from the drainage from the acres of others.
I believe the division order will be based on what you had the instant it was drafted which would be a 12.5% royalty interest. If the operator does not provide it on their own I would demand the payout statement quarterly. The law says you can demand the payout statement and that may keep the operator suitably focused on what you own. You could receive another division order when your well recovers 200% and operating expenses, reflecting your working interest. I hope this helps.
Linda, I would make the demand in writing for the payout statement. You might also print out the relevant section of the law and include it. Oil company people are used to leases where the law is whatever they say it is unless you have enough cash to sue them. When there is no lease they seem to be lost.
Thanks again for all the information!
Linda