I have a division order from Lario on the above referenced property. Why has my interest been reduced and what is a Allocation Well? Any other info would be appreciated.
I am not sure how to answer “why has my interest been reduced,” because I don’t know what your interest was before - are you referring to an interest in another Lario Well drilled on you lands? An allocation well is a horizontal well drilled across several separate tracts of land without either pooling or a production sharing agreement. Production from the well is allocated to each tract traversed by the horizontal well bore based upon some yardstick chosen the the operator. Right now that yardstick is often based on the number of take points (the points where production occurs in a horizontal well) in each tract divided by the total take points in the well. The yard stick can also be total length of well bore. You would be paid a share of the production allocated to your tract.
Thank you Allen! That makes sense! My interest on other wells in that tract was larger. I need to do more research on it.