In calculating the percent of ownership in a mineral interest would it be correct to divide the net mineral acres NMA owned by the total number of acres in the lease yielding a percent number.
Example: 33.291 NMA divided by 141 total acres = 2361063829%. Then in a division order formula the deeded ac DA in a Unit divided by total ac TA in the unit = x then multiplied by percent of ownership PO times royalty percentage RP:
89.45213854 DA / 1275.40317797 TA = .07013636165 x .2361063829 PO x .18 RP = .00298073567 Estimated Decimal Share of Production
This is the formula that SWN appears to use in West Virginia to the best of my knowledge after talking to them. Any comment appreciated.
Yes and no. Your wording is kinda right but I think your math is off.
See if this makes sense:
You were deeded 89.45 acres (sometimes called “gross acres”), of which you apparently have 33.29 net acres (and other relatives probably have the rest of it). You have a percent ownership of 37.22% for that acreage (33.29 / 89.45).
This deeded acreage is part of a lease that is 141 total acres (is it? Does the lease actually cover more than the deeded acreage?). Usually, you can skip this part, but for clarity, you would own 33.29 / 141 or 23.61% of this lease.
The lease is part of a greater unit that is 1275.40 acres, so in this unit, you own 23.61% of 141 acres (which is still 33.29 net acres), and of that 23.61% you own 141 / 1275 [11.06%]. This means for every barrel produced in this unit, you get 0.18 royalty from 23.61% of 11.06% of the production, or 0.18 x 0.2361 x 0.1106 = 0.00469 of each barrel.
My brain processes this easier by thinking your share is 33.29 net acres of a 1275.40 unit (rather than %), of which you get 0.18 (is this supposed to be 3/16th or is it actually 0.18?). This computes to a 0.00469 decimal share of production (33.29 / 1275.4 * 0.18).
Let me know if I misunderstood any of your numbers.
Thanks Tracy. To clarify further my original lease holds 33.291 net acres of the 141 total acres TA leased. That is where I got the 23.6 %: 33.291/141 = 23.6% of ownership. Do you think that reasoning is correct to establish percent of ownership? Then we received a DPU Designated Pooled Unit document that delineated our portion in the unit. That is the 89.452 deeded acres DA of the 141 total acres in the lease. When they drilled and perforated only the 89.452 deeded acres were affected of the 141 total. The total acreage in the pooled unit is 1275.403 TUA. Hence I took the 89.452 DA / 1275.403 TUA = .0713 * .23.6 % = .0165 * .18 % royalty rate = .002979 decimal share of production. This formula is what SWN Energy told me they use for determining Division Orders in West Virginia. Production will primarily be gas and NGL’s. I realize this is different from the way things are determined in TX and OK leases. Many thanks for your input particularly regarding determining ownership percentage.
Ah I see. That makes more sense why there was a distinction between deeded acres and acres in the lease. Are you being paid 0.002979 and you’re just trying to confirm the numbers, or do you think SWN is wrong in their calculation? You’re right in that things can vary between states and most of us here have TX/OK experience vs WV, but in theory most of these equations should be similar enough to point you in the right direction.
The only “gotcha” I’m thinking is (in the places I’ve worked) a lease can group several chunks of land that have varying “percent ownerships” with them. For example, say a lease covered “Sections 2 & 3”, with 90 acres in Section 2 and 50 acres in Section 3. Being a 10% net mineral acreage holder of the 90 acres in Section 2 does not necessarily mean you own 10% of the 50 acres in Section 3. I believe these %'s would need to be the same for your formula to work?
Thanks again Tracy. The .002979 number is just an estimate that I came up with using the formula that SWN relayed to me relative to an eventual Division Order. The wells drilled in our lease are just about to be completed and I wanted to have an idea of what to expect when the DO arrives. I believe the percent of ownership 23.6% is correct based on an identical lease that another family member has with the same net acreage. The remaining acreage is split between 4 other heirs in a single lease # as noted in the DPU. The remaining net acreage must be split amongst them though I cannot confirm that as it is not noted in the memorandum of lease that is filed with Marshall County. We will wait and see what eventual number is in the DO. Just trying to get ahead of it. Many thanks for your input.