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Question
Marsha, If I own a 3/16 share of minerals in a well, what is the formula used to figure how much the producing company will pay me on my share.  Thanking you in advance for your expert advice.          

Harold E. Driskel, Ph.D.

Answer
The formula that a division order analyst uses to calculate the royalty decimal to be paid to a royalty owner is this:

MI x Royalty Rate x (# Lease Acres Included in Well divided by Total Acres Assigned to Well).

Your formula will read:

3/16 x (What is the lease royalty rate?) x (How many of your lease acres are inside the well boundaries?) divided by (how many total acres are assigned to this well?) = Your Royalty Share.

Complete the formula by inserting the missing information, then multiply that decimal by the total barrels or mcf's of gas produced in a given month, multiply that by the dollar price paid for the oil and/or gas that month, then deduct your decimal share of severance tax required by law, then deduct your share of any post-production costs incurred on the gas only (there should not be post-production costs on oil).  That should get you very close to what you will be paid, UNLESS the gas is run through a facility to be separated, treated, and/or dehydrated, in which case you will have additional liquids called "plant products" and it's very difficult to verify the volume of "P" on your check detail.

And by the way: if the well you're talking about is classified by the regulatory agency as a "gas" well, then any gas produced is called "gas" but any oil produced is called "condensate" and usually a "C" product type on a check detail.

If the well your talking about is classified as an "oil" well, then any oil produced is called oil, but any gas produced is called "casinghead gas" but usually is still shown as "G" on the check detail.

Oil/Gas

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Marsha Breazeale, M.Ed., CDOA, CPLTA

Expertise

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.

Experience

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.

Organizations
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)

Publications
"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
B.A.in 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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