Vertical vs. horizontal well

Can anyone explain royalties - for an old lease - that are paid as a vertical well and not the horizontal leg?

It would be more helpful if you posted the state, county and section, township and range or abstract and give some more details. Your question is too vague.

I think I summed it up well…i don’t think location is a factor. Lease is over 100 years old.

Ancel- I think you are asking about vertical units. The formula is your net acres in the unit, divided by acreage unit size, times your royalty percentage. IE, 1/640 x .25= .00039062

Todd, I have replied but am still waiting for admin approval.

The old lease was about 1905 and a vertical well. I believe the royalty pay is for vertical and not horizontal. Ever heard of this?

Todd, for the decimal .0003, what is that multiplied by? production? units of MMcf? Can you do a quick example - say $4/MCF and production at 10 MMCF/day?

Yes, take that number & multiply by barrels of oil & mmcf gas times the product prices.

An example would be : net acres/spacing acres x royalty for a vertical oil well at 1/8th royalty

0.192 net acres /80 x .125=.0003. That is the Division Order decimal amount. The check stub would reflect the volume of oil sold for that month and the price for a gross operator amount. One would multiply the gross sales amount by 0.0003 and get a gross mineral owner amount. The net would be minus any post production charges, taxes, etc. according to the terms of the lease. The original lease should have the royalty stated on it. If the well was a gas well, then the spacing is probably much larger than 80 acres in the example.

Depending upon the wording of your original lease and any subsequent horizontal drilling, the equation differs a bit by state. The spacing would change for a horizontal and be much larger, so the decimal amount would change.

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