We have royality interest in 3 tracts of a recently unitized area that will be water injected, pressurized, etc.... According to the Unit plan and the legal agreement, our three tracts have been assigned a total unit value of approximately 10%. The acreage per tract is 10 (.23%), 40 (3.5%), and 40 (6.2%) acres (700 total) with a royality interest of .0005, .0008288 and .000932, respectively. The division order I received the other day on ly referenced production from the three tracts that we currently have an interest in, but as I mentioned, the Unit plan and legal order combined all wells into one unit. There is an injection well in each of the larger tracts. My question is if our royalties should be calculated based on the total production of the entire unit and not just what is produced from our origional 3 tracts? Will I get a division order for those wells located in the adjacent tracts? Thanks
Tommy Wright,
My answer applies to Texas. If it is any different in Oklahoma someone will have to speak up.
Your royalty from the unitized formation is calculated based on the total production of the entire unit.
Your unitized field may only encompass a few of the formations (instead of all the formations and all depths) called the unitized formation (zone) in the unit area. And will additionally be depth described, such as, equivalent to the subsurface interval as found between the depths of XXXX feet and XXXX feet...
The production from any well on any one of your three tracts producing from the unitized zone will be included in the total production of the entire unit.
The production from any well on any one of your three tracts (or any of the other tracts) producing from above or below the unitized zone will not be included in the total production of the entire unit. That production will be allocated to the tract the well in on.
All production from the unitized formation is totaled each month and then allocated to each unit tract based on the respective tract’s Unit Participation Percent.
So, total Unit production (bbl) X your tract Unit Participation Percent = that tract’s allocation of production. This is then multiplied by that tract’s (your) division order decimal interest to determine your cut. You then multiply that by the $/bbl the oil sold for to get your gross dollars for that tract.
The total production of the unit is not included on my check statement. I have to get that from the TRRC website. I do not know where you will find that in Oklahoma. Only my tract allocation of unit production is included on my statement.
You will not be getting division orders for any of the other tracts.