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Oil/Gas/Division order calculations


QUESTION: I am 1 of 12 mineral interest owners in rusk co tx. The tract of land is 19.16 and the gross acres is 702.91. My calculations are as follows .5x.5x.125x.125x19.16 divided by 702.91 which gives me a decimal interest of 0.000106477 I'm not sure how this figure came about, but does this decimal interest convert to a percentage 0.0106477

ANSWER: According to your calculation, it appears that (1/2 x 1/2 x 1/8 = 0.03125000) is the amount of mineral rights you own in the 19.16-acre tract.  That would mean that the remaining ".125" (1/8) is the royalty rate reserved in your lease.  The 702.91 number is the total number of acres in the pooled unit (and should be stated in the Declaration of Pooled Unit filed into the public records in Rusk County), of which your 19.16 acre tract is a part.

Your decimal calculated as 0.000106477 is correct, then.  Most revenue distribution database systems pay based on the decimal itself, either 8 or 9 digits long.  To convert this decimal to a percentage, move the decimal two digits to the right.  That means 0.000106477 becomes 000.0106477% or 0.0106477%, which is just slightly more than 1/10th of 1%.

To determine roughly how much royalty revenue you can expect to receive from this pooled unit, round back the 9-digit decimal to 8 digits: 0.00010648.  Then move the decimal to the right, placing it in front of the last two digits: 0000106.48.  Remove the leading zeroes and add a dollar sign: $106.48.  You can expect to receive no more than $106.48 for every $1 million produced from the well.  An good well will produce between $20 million or more at $50 a barrel, over its lifetime which could span more than ten years.  The majority of wells seldom reach the $10 million mark at $50 a barrel before depleting and being plugged and abandoned.  This information is based loosely on production records available to the public on the regulatory websites maintained by many of the oil and gas producing states.

---------- FOLLOW-UP ----------

QUESTION: What is the significance of the leading zeros, does all decimals convert to a percentage in oil,gas royalty payments?


The leading zeros are important because they are part of the value of the number.  Your royalty interest is 0.000106477 of 1.000000000.  All of the revenues from all of the sale of oil or gas from your well are the 1.000000000, and you get 0.000106477 out of all of the sale of oil or gas from your well.

Whether you are paid using the DECIMAL of 0.000106477 out of 1.000000000, or the PERCENTAGE OF 0.0106477% out of 100.0000000%, you are still paid the same amount of money either way.

Every royalty DECIMAL can be converted to a PERCENTAGE by moving the decimal places to the right 2 digits.

Every royalty decimal can be converted to dollars-per-$1Million by rounding the decimal to 8 digits after the decimal point, then moving the decimal point to two digits from the end, dropping the lead zeros and adding a dollar sign.

Let me know if you have any other questions.


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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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