We have mineral rights on 220 acres that was brought into production in mid June with 9 new wells at Pettinger's. We got a Division order letter telling us we will receive 0.00173125 interest in what is produced there. We thought since we own the mineral rights, we would be paid more than that. Does anyone know how these rates are determined? This seems really low to us!
The Martin Family
You didn't provide much information to confirm your interest but your interest is determined by the ratio of your actual net minerals acres to the drilling unit times your royalty percentage. Making many assumptions, you net acreage out of the 220 is less than 5 net acres. If you think it is low, better check the chain of title to the mineral rights. I will guess that the minerals have been repeatedly split for many generations or your title has not been updated in the courthouse. the DO numbers are not in the least arbitrary but based on facts on record at the courthouse. DO interests are not negotiable.
If you own ALL the mineral rights, not just surface rights, all of that should have been settled before drilling started. I read somewhere that drilling on Weld County public lands, the county gets 20% - 25% royalty (1/5 to 1/4) share. Example below. Kinda of looks like it is just an oil and gas lease(?) which doesn't really amount to more than renting the surface rights. Perhaps there are a whole bunch of mineral rights owners for your land and you are but a very small fraction of a share. I know I have about a dozen mineral rights owners on mine. And I KNOW I will be corrected on this! my 2 cents.
It is based on your royalty percentage and the size of the unit and how many of your 220 acres is in the unit. For example, if your royaly is 1/8 (12.5%) and the unit size is 1280 acres. 220 acres of 1280 acre is 17.2% of the 1/8 (12.5%) royalty pool. So, in this case you’d be getting 17.2% of 12.5% of the production. My guess is that your whole 220 acres isn’t included in the unit.
I am not an expert, but this is the math that I use when figuring royalties. I hope it helps.
Thank you for your quick and insightful responses. We own all the rights - my husband's family has owned the land since 1943 and they sold off 60 acres in the 1970's when drought nearly ruined them but kept the mineral rights. However, my father in law did lease the land for $10 an acre back then for one little well that was drilled on the property to the east (now owned by Rossi).
But the Pettinger well is actually 10 of them, of which 8 go under our acreage to some extent. So I am hopeful that the letter we got today was for just one of those - and one that is not included in the unit, as J suggested. We don't know what to think, but will be better informed when we make calls tomorrow thanks to all the information Scotty, J, and Gary provided.
These two blog posts should help you walk through it -
Introduction to the Division Order
Calculating a Decimal Interest - Division Orders Part 2
You need to know three things:
1. What your royalty is - check you lease
2. What your ownership is i.e. how many net mineral acres - you seem to have this above
3. What the spacing is - check COGCC - it may be different for each well.
The information is for general information purposes only. This should not be substituted for legal advice and should not be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or reading does not constitute, an attorney-client relationship. You are encouraged to contact an attorney for legal advice concerning the information provided.
This is fantastic information Jenna. Thank you!
Mary
Jenna H. Keller said:
These two blog posts should help you walk through it -
Introduction to the Division Order
Calculating a Decimal Interest - Division Orders Part 2
You need to know three things:
1. What your royalty is - check you lease
2. What your ownership is i.e. how many net mineral acres - you seem to have this above
3. What the spacing is - check COGCC - it may be different for each well.
The information is for general information purposes only. This should not be substituted for legal advice and should not be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or reading does not constitute, an attorney-client relationship. You are encouraged to contact an attorney for legal advice concerning the information provided.