Mineral Interests, Decimal Interests & NPRI

General Mineral Rights Discussion
1

I would appreciate all the help I can get with this. Here is the situation.

1. The 1st owners of a 40 acre tract of land, in an O & G Grant, conveyed a 1/32 part of all the O & G produced & saved from the land…, shall have no right to any lease bonus or deferred rental under any subsequent O & G Lease placed upon said land, but shall only have that 1/32 part, with right or ingress & egress etc., etc. I do not see any conveyed executory rights. (Thus a 1/32 NPRI in the 40 acres.)
2. The 1st owners of the land sold the 40 acres to the 2nd owners. No mention on the Deed about the 1/32 O & G Grant.
3. The 2nd owners of the land sold the 40 acres to the 3rd owners, which was my Grandpa. The bottom of the Deed says, Except Mineral Rights heretofor convey to Mr. XYZ, but no quantity or type.
4. The 3rd owner, my Grandpa & Grandma sold the 40 acres many years later. The bottom of the Deed says, Grantors Reserve “all the Oil, Gas & Minerals that they own. Subject to O, G & mineral conveyances & reservations of record.

The Oil Co. has sent out Division Orders on a 640 acre pooled unit. Their calculations are based on the ownership of my Grandpa, which has been passed down to the heirs in their respective shares. I’m not sure I understand or agree with the Decimal Interest. The Division Order Analyst says, that because my Grandpa’s interest is burdened by this 1/32 NPRI, that instead of getting a 3/16 royalty, that we are going to be docked by 5%, & receive a 13.75 royalty (18.75 – 5.00) which according to the DOA is industry standard. Is this correct? Shouldn’t my Grandpa’s share be 3/16 royalty on 31/32 of 40 acres & Mr. XYZ’s be 3/16 royalty on 1/32 of 40 acres? The only difference being, that my Grandpa gets a lease bonus, deferred rental & executory rights & Mr. XYZ doesn’t. Are there any guidelines to show the proper allocations? Or maybe an alternate calculation method, the DOA did say this was the easiest calculation method. (Meaning there IS another method) Would a Stipulation of Interest be in order, & how would you go about it? Thank You!

2

Dear Ms. Kirk,

As to item 1, I cannot validate your conclusion that the reservation was indeed a non-participating royalty interest. When the grant describes a mineral interest and then removes items from the grant, it is still a mineral interest.

The result is a non participating mineral interest, where the 1/32 is a mineral royalty that floats rather than a fixed royalty interest. Your conclusion may be correct, but I cannot verify it without seeing the document creating the reservation.

A 1/32 royalty interest is 3.125%, not 5% as the division order analyst told you. So, if the interest was a NPRI, you would be entitled to 18.75-3.125, or 15.625%. Perhaps the difference is in the reduction on pooling. Who knows.

Your questions as to 1/32 * 18.75 and 31/32 *18.75 would be the conclusion if the reserved interest were a non participating mineral interest.

Prior to signing off on a division order, make sure that you understand the computation and how and in what manner it was arrived. You could also ask to see that portion of the Division Order Title Opinion as it pertains to the computation of your interest.

The Oil company may or may not furnish that information. Many do not.

Best

Buddy Cotten
3

Thank You Buddy. I appreciate the information. Is there a way I could e-mail you a copy of the

O & G Grant, so you could look at it? I'm not sure where the instructions are on this site to

find out how to e-mail info back & forth. Thanks for your help. Katie

4

Dear Ms.Kirk,

At the bottom of the typing block, there is a hyperlink to upload files. That is the best way.

Buddy