We have received division orders for a new Production Sharing Agreement well on our property. My father owns a one third interest in 320 acres, Reeves County, where we share 50 % of the mineral rights. The pad site is on our land. The royalty is 22.5%. The approx. 2 mile horizontal well travels parallel to our property line for just less than a mile.
The decimal interest was calculated as follows. The Productive Drainhole Lengths are accurate as shown on a certified plat. The first and last take points are platted. The formula is as agreed on the PSA.
I have attached the "As-Drilled" plat of the well showing the total wellbore length of
8659.72 ft. The portion of the wellbore under your lease is 4275.69 ft.
The Net Revenue Interest calculation is as follows for your father's 1/6th Mineral interest :
[Mineral Interest] x [Lease Royalty] x ( Wellbore Length] / [Total Wellbore Length]).
For your father's NRI was calculated as: 0.16666667 x 0.225 x (4275.69 / 8659.72)
= 0.01851542 .
Since this is more complex than anything else we have handled in the past, I would like to
run this past the Landmen and other professionals in the group, as any small discrepancies
may amount to a bunch of money(hopefully)