Rec'd a Division Order

Division Orders
1

I received a Division Order and have a few questions....first a little background.

We are a nonparticipating owner and understand that the cost we did not pay up front has to be recouped. I also understand that we will receive 1/8th of the royalty until that is satisfied. I can verify the decimal interest rate using the 1/8th rate but that rate is only accurate until the costs have been recouped. Should the Division Order state that? The Division Order does state: The Division Order does not amend any lease or operating agreement between the undersigned and the lessee or operator or any other contract for the purchase of oil and gas.....does that answer that question?

Also should we receive a statement that shows the costs being recouped?

Is it true that even though we started out as a nonparticipating owner after we receive a royalty check we are now a participating owner and will be liable for future expenses?

Last question...the mineral deed shows gross acres as 320 but the oil company is using 640. Is that a pooling number? And I really don't understand a pooling number.

Thanks,

Linda

2

Linda, you can search forced pooling Montana at the top right of the page. I would suggest that you not pay attention to what Mr. Dayton says 350%, as I believe I showed that he did not know what he was talking about. I would suggest you read the law [82-11-202 for yourself, although I think you probably have already. If the operator does not send you statements on payout and expenses, I would demand it as the law says you can.

You will not become a working interest partner liable for expenses until the operator has recovered the 200%. You have only a royalty interest until the operator has recovered the 200% and you can cash those royalty checks. Operators have complained before about how the royalty will "magically" morph into part of the working interest after the 200% is recovered but it seems the lawmakers were at least fair to that extent to make sure that the mineral owner got something if there was anything there to get, even if the well was poor. Best of luck with your well.