Decimal interest division

Ownership and Title
1

We just received some division papers relating to a change in oil purchaser. My concern is that when we inherited the rights my mothers decimal was .0416667000. it was suppose to be divided 1/2 and 1/4 and 1/4. So, on this set of division papers I compared my moms decimal with what they have been giving us and the numbers don’t add up. Is there some special math they use besides just simple dividing? Or in my ignorance about all this did I just mess up when they did we completed the paper work a couple of years ago. Can I fix it? Thanks

2

Sandy: here is how the decimal in the division order is computed in Texas:

  1. First, we take your percentage of mineral ownership in the land in question, and we multiply that by the number of surface acres in your entire tract. The resulting number is your net mineral acres. For example, if two relatives together own a one-half interest in a forty acre tract, or ½ times 40, they have twenty net mineral acres.

  2. Secondly, if the land is located in a pooling unit, (sometimes also called a pro-ration unit), we multiple the total number of acres in the tract by a pro-ration fraction. The reason for this is that each royalty owner in a pooling unit is only entitled to their proportionate share of the oil or gas produced by the entire pooling unit. A pooling unit is an area around a well that is set by the Texas Railroad Commission, and is intended to approximate the area drained by a producing well. Pooling units can range in size from 80 to 640 acres or more. For example, for a forty acre tract that is located in a 320 acre pooling unit, that forty acre tract is entitled to 40/320, or 0.12500, of the minerals (whether oil or gas or both) produced by that 320 acre unit.

  3. Third, we multiply that result by the royalty fraction in the oil and gas lease you signed.

  4. Finally, we divide that result by the number of current owners to determine what portion of the total production from the pooling unit each owner is entitled to.

By way of example, let’s say you and your sister own 20 net mineral acres in a 40 acre tract. Let’s also say that the pooling unit is 320 acres. This fraction in our example would be 40/320. Next we multiply that result by the royalty fraction in the oil and gas lease that was signed, which in our example is 1/6. Finally, we divide that result by the number of owners, which in our example is two.

Here is the calculation for our example in numeric form:

First, I convert the fractions to decimals so they are easier to multiply:

20/40 = 0.5 40/320 = 0.12500 1/6 = 0.166666 1/2 = 0.5 Next, I multiply out the calculation:

0.5 X 0.12500 X 0.166666 X .5 = 0.005206

The result of this calculation is that for every dollar of oil or gas sold from the well, you and your sister in our example would each get 0.005206 of that dollar.

Oil and gas companies can and do make mistakes in calculating a mineral owner’s royalties. If you think there is an error, first contact the issuer of the division order and ask them to tell you their calculation. If they won’t respond or you think they are in error, you will probably need an oil and gas attorney to work on this for you to get it corrected.

1 Like
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Sandy: let me also add that if there is an error, it can be corrected, even if you signed an erroneous division order in the past.

4

Thank you Aimee. I will call the company and see what they have to say.

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Thank you Aimee, I did contact the issuer of the division order, as you suggested, it appears that when the new company took over they chose to manage the well by all acreage involved. So all of the mineral owners had changes in the decimal percentage. It sounds proper and the property description did change to reflect that.
Thanks again for your advice.

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Sandy: so glad to hear it worked out.

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