What is a GPI Factor and how are they assessed to an owner’s minerals? Ovintiv sent me a DO to sign and I requested they provide the “math” used to calculate the Decimal Interest. The last variable was a GPI factor, that basically cut the RI in half. The mineral/well in question is 14-17W-10 Blaine County OK,
GPI Factors - Iguana (API 35-011-24422) 1710-2H-11X: Section 11-17W-10N .497398, Section 14-17W-10N .502602. Evidently it’s a fairly new well, I can’t locate it on the OCC Well data website.
My dear and close friends at ChatGPT wrote me back a lengthy response to your inquiry. I copied what I thought was the pertinent answer as to what & why whatever they are calling GPI is applied in your case. Definitely needs further exploration.
“Why Section 14 may receive only half
Assuming you mean Section 14-17N-10W, the well likely has a horizontal completion interval extending through Section 14 and an adjoining section—possibly a two-section, approximately two-mile lateral.
Oklahoma defines a multiunit horizontal well as one whose completion interval crosses and produces from more than one spacing unit.”
ChatGPT aslo provided an example of the math. Happy to forward you the whole response if you’d like.
1 Like
GPI is gross production interest. It is essentially the allocation factor for the portion of a well production allocated to your tract. For simplicity, A owns minerals in Sec 10 and B owns Sec 11 and both have 25% royalty. Horizontal well is drilled across both sections. Operator cannot pay both A and B a royalty of 25% on all of the production, because that would total 50%. So the company needs a method to allocate the production and royalties between A and B. Frequently the allocation is based on the percentage of the productive horizontal within each section - such as your 49.74% and 50.26%. So A gets 25% royalty X 0.4974 = 0.12435 and B gets 25% X 0.5026 = 0.12565. The total royalty paid is 0.2500, but just divided between the mineral owners.
1 Like
Thanks, but why isn’t Spacing part of the equation? Theoretically, speaking if the spacing for section 10 is 640 and section 11 is 640 then 25% of 1280 pays both A&B 25%.
The formula I was given from the Operator suggests the spacing is 640 for this well but it’s for both sections, which doesn’t appear to be common if it is a vertical well, and not sufficient if it’s a horizontal well.
Decimal calculation is as follows:
1.066667 (nma) / 640 (unit acres) x 1/5 (royalty rate) x 0.502602 (GPI Factor-Section 14) = 0.0001675340 RI
OK has an equation which is what you had above and includes the unit spacing.
Net mineral acres/actual drilling spacing unit acres x royalty x percentage of perforations. So for section 14, your decimal interest is what you have stated above. Section 11 will be similar, with the other GPI. Most OK horizontals are spaced at 640 for each section for multi-section wells. (If one has sections along the northern tier or western tier of sections, they may not be exactly 640 due to the curvature of the earth corrections.)
Occasionally, the spacing will be a 1280, so then the perforations add up to 100% for the last term.
If your decimal amount is not making sense, then the mineral acres or the royalty may need to be investigated.
1 Like
The final percentages for each section will be in a followup order by the OCC. Usually in the multi-unit case that went with the particular well.
Also, by law you are not required to sign division orders in Oklahoma in order to receive payments, but you do need to return a W-9. There are several posts elsewhere on the forum that discuss this and give a sample letter to return instead. Also NARO members can view an excellent webinar recording on the topic that explains why it usually best not to sign.
