I have received a division order and am trying to determine if I should sign it with the decimal interest shown.
The lease is for 1/28th of 640ac with a royalty of 22.5%, but is burdened by a 1/4 NEMI. By my math, this makes the royalty interest 0.00602679.
The lease is pooled to create a Tract Factor of 0.66338798 (157.82/237.90).
Multiplying the tract factor by the royalty interest yields 0.00399810. I think this is the number that should be on the DO.
The DO I have been asked to sign has a decimal interest of 0.00399685.
When I asked how it was calculated, I was sent the following in an email:
"Your interest is burdened by a Non-Executive Mineral Interest (NEMI). We have made a diligent effort to get all NEMI owners burdening your interest to ratify the Designation of Pooled Unit so we could calculate their interests based on pooled acreage. Most, but not all, have signed the ratifications. The NEMI owners who did not ratify are being calculated on a percentage of perforations for the tract instead of acreage. The difference is shared among all RI owners who are burdened by their interest. Your proportionate share is shown in light blue.
This well had additional ratifications come in effective 9-1-18. The adjustment to your interest was changed slightly as shown in green on the spreadsheets that say “DO Deck Eff 9-1-18”. Your base royalty interest has not changed so we do not require additional signatures on division orders. You will notice the different decimals being paid on your check."
There were a couple of pdfs of spreadsheets attached. The first pdf, designated DOSF (date of first sale?), shows an adjustment of 0.00000144 and a “revised royalty” of 0.00399666. The second pdf, designated DO Deck Eff 9-1-18, shows an adjustment of 0.00000125 and a “revised royalty” of 0.00399685. This second number matches the decimal interest on the DO.
My thinking is that the DO should reflect the base royalty interest (in the language of the person who authored the e-mail) and not the adjusted interest.
What do y’all think?