Understanding concept of calculating Division Order interest

Division Orders
1

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.

2

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.

3

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.

4

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?