I am trying to figure out some issues we are having with JIB invoicing and revenue payments for what is supposed to be Working Interest in a large Unit. Does anyone happen to know why the division order for the WI (working interest) would have the interests listed twice one right after another on the Division Order? Everything is the same for each duplicate interest listing except on the line item “DO Maj Prod” one says All and the next listing says 100. This is a small Working Interest in a large Unit that I inherited. The interests on the Division Order are listed by Tracts in the Unit where we have our interests which are only two of them. When I spoke with the revenue department for the Operator about how the WI is invoiced and how revenue is paid if we elect to participate in a new drill they claimed our WI percentage for JIB billing is Unit Wide for each well in the Unit. However, they said the revenue is only paid on a Tract basis and distributed to the Tracts and then according to the Tract owners percentage within the Tract afterwards. Does this sound correct? Shouldn’t a Working Interest also be paid Net Revenue Interest on the specific wells we elect to participate in and pay our share of the costs in such as recent new drill proposals? We get proposals and elections regularly and they are for wells in various areas of the Units not just our Tracts. When I asked the revenue department how it is beneficial to participate in the new wells as a working interest owner all they would tell me is it’s more revenue that goes in to the Unit “bowl” to be distributed to all Tract interests throughout the Unit even if we chose to be billed for our cost of the new well under our working interest ownership. From looking at old records briefly it looks like at some point our Working Interest may have gotten mixed in with a small ORRI and the WI revenue has never been paid correctly and been overlooked probably due to no one electing to participate in a new drill before I inherited them. If anyone has any insight or can correct me where I’m wrong I would be grateful for the help.
Your email is confusing as to the decimals and you will get more specific answers by identifying the operator and state and unit as someone else may own a WI in the unit. You may see a WI decimal which would determine your share of costs (JIB decimal) and a smaller NRI decimal which is your share of the revenues LESS the royalties due to the mineral owners. Some operators pay on the unit basis and others pay on the tract basis. If paid on the tract basis, then the volumes and sales will be adjusted to make you even. Suppose your unit decimal is 0.001000. Suppose your tract decimal is 0.020000. Suppose the gross revenues are $500,000 for the month. Operator A pays on a unit basis, so your share is $500, less the royalties. Operator B pays on a tract basis, using the 0.02000. Obviously, they cannot pay 0.02000 X $500,000 = $10,000. So Operator B allocates the production and sales based on the tract. The tract allocation factor here is 0.00100 unit / 0.02000 tract = 0.05 which means that your tract is 5% of the unit. So Operator B will pay your on $500,000 X 0.05 X 0.0200 = $500. Usually both operators will charge the JIB for 100% of well costs X Unit DOI (0.00100 in this case). The more wells drilled, the more gross revenue for the unit. If you do not participate, then you will not be charged the costs and you will not receive revenue based on 100% of the unit, but only on the wells you have participated in. Have you read the Joint Operating Agreement (JOA) for the unit to see if there are penalties for not participating in the well (e.g. your share of revenues is charged for the well costs up to 200% or other penalty rate)? Or it may be set by the State in the pooling order. Being a WI in an active unit is complicated and you need to do a lot of research to understand this. As to the ORRI, it will depend on the back paperwork. Based on may experiences, I doubt that there was a mix-up with a WI. I hope that your predecessor saved all the data, agreements, leases, pooling orders, etc associated with this WI and you have copies. Otherwise you will need to ask the operator for some of this data.