Understanding concept of calculating Division Order interest

Trying to understand how to verify my royalty interest as shown on a Division Order. From several different sources I find the following formula:

lessor’s acres in a unit / total # of acres in the unit x lessor’s ownership interest x lessor’s royalty %.

  1. As an example let’s say the lessor’s mineral deed says they own an undivided 1/2 (or .5) of 1/4 (or .25) interest in oil produced from certain lands. So they would have a (.5 x .25) = .125 interest in the oil produced from the land.

  2. Assume the lease gives the lessor a 1/4 (or .25) share of all oil produced.

Using these numbers I would think the number that should appear on a Division Order for a ROYALTY interest would be .125 (interest as listed in mineral deed) x .25 (interest from the lease) = .03125

I have received a Division Order where, by my using the information as described in #1 and #2 above, it DOES result in the interest as shown on the Division Order.

What I don’t understand is where the “lessor’s acres in a unit / total # of acres in the unit” portion of the formula at the top of this posting enters in.

Would the distinction be if my interest as listed on the Div. Order is a ROYALTY interest (vs. some other type of interest) then the first part of that formula shown at the top of this post would not apply?

Would the distinction be if the well that the Division Order applies to is in a “Unit”? What if the well is NOT in a “Unit”?

And how would I determine if the well that the Division Order applies to is in a “Unit”?

I’d appreciate any help in understanding the concept of how to correctly calculate my interest as it should appear on a Division Order.

If you own 1/2 minerals in 40 acres and the well is drilled on 400 acres, then your royalty decimal will be based on (40 x 1/2) / 400 x 0.25 royalty = 0.0125. Usually there is a unit recorded in deed records which details the acreage and depths. You can download from deed records for a fee. The permit should note if there is a unit. Some horizontal wells are drilled as sharing or allocation wells (no unit) and most often the production is allocated according to the length of productive lateral crossing your 40 acres divided by the total productive lateral.

TennisDaze is correct for TX. If you have OK wells, the equation is a bit different. If you need help on OK, let us know and we can add more information.

Thanks M_Barnes, but I don’t have any wells in OK. I am surprised to hear that the equation can be different depending on the state. I would have thought the calculation of a Division Order Interest would be uniform no matter what state. Yet another complexity to the field of oil and gas?

1 Like

We just recieved our Division orders after being contacted a few months back that we were the heirs to someone who had mineral rights in Doddridge County. We had no idea what to expect but were told by the Landman that found us to expect it and to fill it out and return it in order to receive our Non-Participating Royalty Interest. The instructions say to verify our net revenue interest (NRI). How do I verify that? I read something that said if you sign it and it’s found out the NRI was wrong, if they owe you, they won’t have to pay because you signed the order, but if they were to find they overpaid, you’d have to pay it back regardless. I also read that there isn’t a way for me to verify it so I should cross that section out and return the order. I know there must be many like me who had no idea they had this inheritance coming and are suddenly trying to figure out how to do it right while reading as much as you can to learn about this new thing. Please advise Thank you

You can contact the Division Order analyst by certified mail return receipt and ask them how many net acres they are carrying for you. Or how they calculated your NPRI. Keep copies of all correspondence.

1 Like

This topic was automatically closed after 90 days. New replies are no longer allowed.