I have a small royalty interest (0.000977) in a Texas oil well. A few years ago, three horizontal wells (designated 1H, 2H, and 4H) were installed in association with the original well. Production from these wells began in December, 2010. I was not aware of this until about three months ago.
A couple of months ago, I received Division Orders from Sunoco for these three horizontal wells - one Division Order for each of the three horizontal wells. All three Division Orders specify a royalty interest of 0.00035527. I signed and returned all three Division Orders. Given the issues described below, I hope that wasn’t a big mistake.
A few weeks later I received payment for the past few years production from these horizontal wells. Careful review of this payment has raised several questions:
Question #1: How did Sunoco come up with a royalty interest of 0.00035527? 0.000977 / 3 = 0.00032567 NOT 0.00035527.
Question #2: Production data on the Texas Railroad Commission (RRC) website for the three horizontal wells is reported under a single Lease ID number but on my payment, Sunoco shows production data for each well individually. For most months, the sum of production for the three wells on the Sunoco payment is equal to the amount the RRC reports but for some months, Sunoco shows more production than the RRC reports. Where did Sunoco get production data for each individual well?
Question #3: This may be the most important question as it has a huge impact on the amount I was paid by Sunoco. In their payment to me, Sunoco provided monthly production and royalty payment amounts for each horizontal well. Sunoco’s data suggest production from well 4H ceased in February, 2014 but steady production from wells 1H and 2H continued after that date. Sunoco calculated my payment using their 0.00035527 royalty interest number for production from wells 1H and 2H. Because Sunoco shows no production from well 4H, I only received a 0.00065133 (0.00035527 X 2 = 0.00065133) royalty interest from the cumulative production of the three horizontal wells since March, 2014. Shouldn’t I have been paid for my full royalty interest (0.000977) of the cumulative production from all three horizontal wells?