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Question
My mother has owned mineral rights on property in Canadian County Oklahoma since approximately 1980 and has received royalty payments from these rights since the early 1980's.   Additional wells have been drilled from time to time by different companies and she has always promptly received division orders and payments.   In the fall of 2012 Devon Energies drilled a horizontal well on the property where she has rights and production began December 14, 2012.  Repeated requests to Devon for information on division order status have been pretty much ignored.  I was told today that division orders on this property have not yet been set up "in their system" and that would likely happen in June and that they would be sent "after June".  No discussion on when royalty payments would begin.  My mother is quite advanced in age and I am certain she would enjoy the income more while she is living!   Is this a reasonable response from Devon?  This does not seem like the way an Oklahoma company should treat a fellow Oklahoman.  Thank you

Answer
By state law, a company in Oklahoma has six months from first sale to begin paying on any new well. Any payment that comes for production more than six months old will be subject to interest of at least 6%, and as much as 12% per year. See the Production Revenue Standards Act in Oklahoma Title 52 (52-570.10)for specific info. It states in part that:

1.  Proceeds from the sale of oil or gas production from an oil or gas well shall be paid to persons legally entitled thereto:

a. commencing not later than six (6) months after the date of first sale, and

b. thereafter not later than the last day of the second succeeding month after the end of the month within which such production is sold.

Note: It's fairly common for companies to go beyond the six month requirement, but usually within nine months they'll start paying. You'll usually need to "remind" them of any interest due as well. With all the activity going on in Oklahoma it's common for already overworked (and probably underpaid) division order people to get behind a bit, especially if the ownership within the drilling and spacing unit consists of many owners.

If your mother really would like to enjoy the benefits of the well now, rather than later, she should consider selling her mineral rights, while keeping in mind that if she does so she will not be able to "hand them down" to any heirs since she won't own them anymore (though cash is certainly an option). She may rather get a nice "lump-sum" payment upfront that would enable her to enjoy the benefits of the well all at once rather than over (potentially) many years of receiving monthly royalty checks. If she'd like to go this route you might have her check out the FAQ pages on my website to help her determine if selling is something she wants to do. There are both pros and cons of selling that should be considered.

Hope this helps you out.
Frederick M. "Mick" Scott CMM, RPL
www.mineralhub.com
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Frederick M. Scott

Expertise

Oil and gas leasing, lease negotiations, how to best deal with the oil and gas companies or their representatives, buying/selling mineral rights, forced-pooling, correlative rights, deeds and conveyances, and "post-production" costs. I am most experienced with Oklahoma properties and laws, but am able to answer questions concerning other oil and gas producing states in many cases.

Experience

I am a Certified Professional Mineral Manager (CMM) certified by the National Association of Royalty Owners (NARO) in Tulsa, OK. I am also a Registered Professional Landman (RPL) with the American Association of Professional Landmen (AAPL). I have managed my family's oil and gas properties in Oklahoma for over 10 years and have dealt with many landmen, title analysts, attorneys and other oil and gas professionals in the process. I have written several articles which have appeared in various oil and gas industry magazines and newsletters. I have negotiated and drafted leases, prepared deeds, affidavits, and other legal instruments relating to my own minerals, as well as performed title, legal research, and curative work for same. I have acquired a good deal of knowledge on the subjects of oil and gas law, mineral appraisal, and landwork over the past ten years, and also worked as a professional landman and lease buyer for a time. I've seen the business from "both sides" and therefore feel confident I can help out most of the folks who ask questions in this forum.

Organizations
National Association of Royalty Owners (NARO); American Association of Professional Landmen (AAPL)

Publications
National Association of Royalty Owners "Action Report" (ROAR); NADOA Magazine, The Mineral Hub, Landman Magazine, and several royalty owner association group's newsletters.

Education/Credentials
Certified Mineral Manager (CMM), Registered Professional Landman (RPL)

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