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My question is: My division order indicates the terms under BPO title.  My lease contact has a market enhancement clause that states I would be paid at Gross and no marketing, transportation, etc will be deducted.  Does this seem correct(BPO)?  There is another title with APO that is blank.

The term "BPO" means "before payout" and usually refers only to a change in interest decimal for working interest and/or overriding royalty interest owners after the well produces enough revenue to "pay back" 100% of the costs incurred on it up to that date.

"BPO" can also refer to an "escalation clause" in an oil and gas lease.  For example a royalty clause in a sophisticated lease can provide for a 20% royalty rate for each well drilled on or including the lease (pooling), but will increase to 25% royalty rate when the well pays out 100% of its cost from the revenues it produces.

Your division order contains the "BPO" acronym only because the computer system they are using has the "BPO" in the description of the well record that it was printed from.  All division orders issued to all owners in the well have the same "BPO" on them then, and it actually applies to only a very few owners in the well.

Your lease provision barring deducts for marketing, transportation, etc., is called a "cost free" clause.  That must be honored for all production revenues you are paid, regardless of whether or not any working interest owners or override owners have paid out to get an increase in their decimals.  And by the way, their increase/decrease in decimals will never affect your lease royalty decimal.  You are owed that no matter what, and it must be paid to you "cost free".

Please send me a follow-up question if my explanation is not clear.


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Marsha Breazeale, M.Ed., CDOA, CPLTA


All questions regarding division orders; ownership decimal calculations; title ownership and payer record changes (testate/intestate inheritance; deed; assignment; court order); oil and gas lease analysis for record-keeping and purposes of payment by operator or payer; pooling, horizontal wells, horizontal well allocation units; unclaimed property reporting; royalty owner relations questions. All questions concerning administration of surface land contracts and payment questions, such as for Surface Right-of-Way, Sub-Surface Right-of-Way, Easement, Surface Use Agreement. All questions regarding industry-standard and company-specific policies that affect land owners.


Sr. Staff Division Order Analyst. Certified Division Order Analyst (CDOA, National Association of Division Order Analysts) and Certified Lease Analyst (CPLTA, National Association of Professional Lease and Title Analysts) with 35 years of experience as a combination division order analyst and lease analyst in exploration and production in the oil and gas industry.

National Assoc. of Division Order Analysts (NADOA), National Association of Division Order Analysts (NALTA), American Association of Professional Landmen (AAPL), American Society of Trainers and Developers (ASTD)

"How an Oil & Gas Exploration & Production Company Operates" and "Principles of Oil & Gas Lease Analysis: Standard Clauses", Oil Patch Press; Articles in NADOA Magazine; LandFocus EDU Professional Training Manuals

Education/Credentials Management from Our Lady of the Lake University in San Antonio; M.Ed. in Instructional Design from WGU Texas.

Past/Present Clients
Past 15 years: GeoSouthern Energy Corporation; Contango Oil Co./Crimson Exploration & Operating Inc.; Apache Corporation; BP America; Marathon Oil; Newfield Exploration

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