The PSA sets out the method of allocating production and royalties to the owners of the tracts underlying the horizontal wellbores. This will determine your royalty decimal in the horizontal wells. The vertical wells have been drilled on different, generally smaller, tracts and the production is allocated only among those owners. Your royalty decimal will be different in the vertical and horizontal wells. The purpose of this clause is to keep the ownership and allocations of production from the vertical and horizontal wells separate. You would not want your royalty decimal in the vertical wells to be reduced by sharing the production with owners in another section.
1 Like