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Oil/Gas/Division Order Decimal

Question
We received a division order for a newly producing well in Wyoming.  We noticed the decimal interest is different to a relatives interest that was stated on a "forced pooling" application from a few months back.  We found this "forced pooling" document on WOGCC.com  Our interest was not stated on the document as we were not "force pooling".  The relatives interest should be the same as our interest. Therefore we assumed we knew what our interest was going to be.  My question:  Can the interest level change from the time the operating company is pooling and force pooling to the time the division of order is sent out? Or, might they have made a mistake on what our interest should be?  Thanks in advance for taking the time to answer my question...

You state you were not force pooled.  That means you signed a lease or your interest is covered by a lease signed by someone else (an ancestor, maybe).  Your lease contains a specific royalty rate that was agreed between the Lessor and the Lessee.

If your relative was force pooled it means they did not sign a lease.  The WOGCC basically used their authorized powers to declare your relative's interest leased, but at the royalty rate stated in the force pooling order.  Or, your relative did sign a lease but it contains a higher royalty rate than your lease. I get the impression that your royalty rate is lower than the royalty rate either granted by the WOGCC in the order, or contained in your relative's lease, which tells me that either your lease was one of the first taken in the area, or you decided it was more important to get a higher bonus-per-acre amount than a higher royalty rate.

A force pooling order is only issued for a unit that has been designated and drawn (plat mapped), so the number of acres in it are definite.  Before turning your attention to your relative's interest, first determine if your division order decimal is calculated correctly.

The basic calculation for a division order decimal is: (Mineral Rights Fraction or Percentage) times (lease royalty rate) times (gross surface acres of the lease placed inside the pooled unit) divided by (total unit acres). Just replace each item inside a set of parenthesis with your actual information.  For example, if you own 1/2 of 1/3 of 5/8 mineral rights, your lease has a 20% royalty, only 38 acres of your 60-acre parcel is inside the unit, and the unit has a total unit size of 563.28 acres, your calculation would be:

(1/2 x 1/3 x 5/8) x 20% x 38/563.28 or 0.00140546 RI.

To find out how much money to expect to receive from an eight-decimal interest, move the decimal point to the right and place it in front of the last two digits.  Then read it like money: 0.00140546 becomes \$1,405.46 for every \$1 million produced from the well.

I hope my information helps you understand your division order better.  If not, you should call the company who issued it (their name is on it, and there should have been an instruction letter containing a contact telephone number) and ask them to tell you exactly how the decimal on it was calculated.
Questioner's Rating
 Rating(1-10) Knowledgeability = 10 Clarity of Response = 10 Politeness = 10 Comment Clear and concise answer. Very thorough! Thank you so much for sharing your expertise.

Oil/Gas

Volunteer

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