I inherited and overriding royalty interest from my deceased father. The lease is located in West Texas. This lease was originally taken my father and two other men as partners in the mid 1970's. The lease has several provisions as to drilling comitments, continous drilling clauses, etc. My father and others farmed out the lease to an operator and retained an overriding royalty interest. The operator drilled four oil wells on the 340 +/- lease. Later on the original and its WI etal's sold the producing property to another operator. The producing property was acquired by the third operator within the last 5 years.
The third operator sent out division orders to distrute the oil and casing head gas. In the past the oil and gas purchaser distributed the ORRI. The third operator sent out division orders and I was reluctant to sign because the ORRI net interest was cut in half. I called the operator and the company sent me a new title opinion to explain why my ORRI had been changed. I read it and basically the third operator took new leases within the same 340 acre lease outside the proration unit of each oil well. I then signed the division order but still not convinced that these guys could reduce the ORRI on this lease. This operator re-worked two existing well bores by cutting a window in the long string and completing an open hole completion in the producing formation underlying the boundary of the original lease. This well produced into a common tank battery along with the marginal vertical wells. This operator lost the re-worked hole due to excessive water influx and or mechanical problems. The operator proceed to re-work another vertical hole in the same fashion with limited results. Recently operator drilled a horizontal well producing 50 bopd plus with its horizontal section within the confines of the original lease boundaries.
I realized that I signed the division order but I still feel that my inherited ORRI interest should have remained the same. Anyone have any sugestions or am I barking up a tall tree?
Mr. Powell,
Compare the old DO unit size to the new DO unit size. Different sized producing units in different formations may explain why the ORRI is smaller. If acreage outside of your 340 acres was added to the unit, you will not have an ORRI on the added acreage. Just a thought.
All wells are and within the boundaries the original 340 acres lease and all wells are producing from same formation. I appreciate your post but the overriding royalty has changed due to operator taking new leases outside the four wells originally drilled and completed on the lease. Blows my mind that they can do this do the fact is all wells produce into the same tank battery. I may have made a mistake by executing the reduced interest DO.
Gary L. Hutchinson said:
Mr. Powell,
Compare the old DO unit size to the new DO unit size. Different sized producing units in different formations may explain why the ORRI is smaller. If acreage outside of your 340 acres was added to the unit, you will not have an ORRI on the added acreage. Just a thought.
Gary L Hutchinson
Minerals Management
An ORRI would not convey in any shape or form (like a mineral ownship, for example) from one lease to another. If new leases were taken, you would not be part of those. If production has stopped for any period of time or if anything else causes the old leases (by their own terms)--to which you have an ORRI--to become null and void and new leases secured, you would not have an ORRI in any of those leases, even if from the same exact wells. I am very interested in knowing more details about this issue, and any input that others have would certainly be welcome. My personal experience with ORRI was this: a friend inherited minerals with production, but over the years received new division orders because the operator had changed. His royalty was very small, and some of his relatives were getting the same royalty PLUS an ORRI which was because their father/grandfather had negotiated the lease and received ORRI which kept getting passed on over the decades. Research showed that the wells had gone for periods of time without any production, thereby, according to the terms of the original lease (1950s) terminated. But, the same lease with the same terms kept getting passed on from one operator/producer to another. When I notified the current operator that they were operating under a lease, that by its own terms had become null and void, they hired an attorney to research the lease, and it was agreed that the lease, by its own terms, had become null and void repeatedly over the years, but no one had done anything about it. In the new lease, the family members who once had an ORRI lost that completely, and of course were unhappy, but once they understood the legality of it, they acquiesed. Their ORRI was attached only to the old lease.
Mr Hicks The lease has always produced since drilled in the late 1970's. The lease has several clauses. The lease had 4 producing wells originally within the 340 acre lease. The operator states that per original lease these wells only hold the proration units established by the RRC. I guess that half of the leases had expired years ago. The horizontal wells is within the original lease boundary and producing in two same tank battery as the vertical well. The vertical well is marginal less than 2 bopd. But I lost 1/2 ORRI on it. I have a copy of title opinion that was prepared for the operator after taking new leases outside of the proration units (3-4 Years ago) and copy of the original lease and assignment of lease to the original operator that drilled the vertical in the 70's. I probably have lost 1/2 my ORRI and I can not confirm the actual amount of production today is being produced from the vertical well. I can retrieve RRC records as to production before re-works and horizontal well was drilled and completed. I probably do not have any re-course.
You can revoke a division order anytime on 30 days notice, fyi.