Respacing results in loss in decimal interest

General Mineral Rights Discussion
1

Family owns mineral lease in Custer County. SE/4 (160 acre) Township 14 North Range 18 West. .040052 royalty interest.

Well located in NE quarter was recompleted to another interval and granted new spacing, as follows:

SPACING 7/6/2020 - GB1 - FORMATION UNSPACED; 640-ACRE LEASE

Now the NRI has been restated as .002500130 which is a lot less than 6.4/640.

Without any details about the 640-acre unit, it appears only a fraction of the 160 is participating. How does that work, and how can the operator hold the entire quarter section as HBP when we are not getting paid proportionally?

1 Like
2

Seems you have 6.4 acres on a 1/4 royalty lease. So 6.4/640 x .25= 0.0025.

3

Trying to understand… Since the minerals are in the SE/4 and the well is drilled in the NE/4, that means the production has been allocated to different quarter sections by some formula. Possibly the SE/4 is entitled to 25% of the revenue?

It’s odd that the “Division Order” notifying our company of the recompletion and royalty interest was written on the operator’s letterhead (not an official OOGC document) in 2020. It was never signed and returned by my father. Is there an official Division Order somewhere with seals and signatures lurking in the courthouse or database? If so, how to locate?

4

Your interest was originally in a 160 acre unit. Now the new well is in a 640 acre unit so your decimal interest is 1/4 of what you had before. It will be that way for any well drilled in the 640 acre unit.

1 acre anywhere in the section is entitled to 1/640th interest, times the royalty percentage of the lease.

Division Orders are not sent out by the OCC, rather the operator of the well. The one your father has should be signed & returned with a tax ID # so he can get paid.

5

Following up on what Todd said:

  1. Your net revenue interest is smaller, but the pond is four times as big.
  2. The division order always comes from the operator or purchaser. It doesn’t come from the Corporation Commission.
  3. By not signing the Division Order, your father didn’t really do himself any favors. Simple formula - sign Division Order, provide W-9, get check.
6

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