Well payout

I have a client who is a royalty owner and working interest owner. The Operator claims the wells are paid out on a lease basis and and not a well-by-well basis. I don't agree; otherwise, an Operator could continue to spend money so nothing ever pays out. This has happened to more than one client.

I wonder if there is any case law which says well payouts are on a well-by-well basis?

It all depends on the details of the particular situation, such as - state where property is located - whether this is unleased mineral owner or an investor in the well/lease - did the owner/investor sign any documents and what are the terms - how long has this been going on and how many wells, etc.

It is in Texas. There are 3 wells. The operator refuses to pay claiming it is on a lease basis and not on a well basis since 1 has already made a profit.

It's an issue that has not yet been fully decided by the courts. I tend to fall on the well-by-well basis because of your logic above and the fact that not all owners in one well will own in another. The operator's accounting would get extremely difficult in those scenarios. Could you PM what operator? I know of a couple that have taken this position, only to reverse course down the line.

Brandon, I'm not sure how to PM; I looked for it but could not find how to do it.

It would be great if they had a handy button to do that.


Check your 'Inbox' for a message.

Clint Liles

Clint Liles did a great job helping me. All I had to do is click on Brandon's picture and then click friends.

Thanks Clint for the help!!