Hello. Revisiting a topic from earlier this year regarding my property and offers I had received. Today, I received a Division Order from Centennial (who had the lease). I know there are issues regarding ensuring the decimal interest is correct, etc. Anyone have any thoughts or insight? It would be greatly appreciated. Thank you.
Jeff
What specifically is your question?
Hello. Just looking for some insight about what to best look for with the Division Order. This is not my field of expertise by far…
You should calculate your decimal interest in the well. If there is a unit, It is based on your net mineral acres in the total unit acres and royalty rate. If it is an allocation or sharing well, then it is based on your Royalty rate, your net minerals in the tract underlying the horizontal wellbore and the percentage of the producing lateral (total distance from first take point to last take point) under that tract. Do you know the number of net mineral acres you own? This is your fractional ownership off the gross acres in the tract. Such as 1/10 of 50 acres = 5 NMA. Contact Centennial to ask how the decimal was calculated for a starting point.
Try to find an unaffiliated division order analyst with land man or oil and gas professional 2 review the information and confirmed the correctness of what the operator has stated. They do make mistakes from time to time, and most often the wind is only blowing One Direction
Thank you for the replies. I reached out to Centennial yesterday to inquire regarding the calculation. I guess I will wait to see what they say. I guess this means they will / have started the drilling currently?
Division orders are only sent after a well is already in production
Jeff,
receiving a Division Order is a good thing. They are preparing to be able to pay you for a well either on your land or the section you are on partially. If you don’t know what you mineral royalty interest is, you can still determine it. They should have a decimal interest showing on the Division Order. It is calculated by multiplying your mineral royalty interest times your percentage of the section. Looking at it in a simple example, lets say you have a quarter of the section (160 acres) and you mineral interest is the max available at a quarter then your decimal interest is .25 X .25 = 0.625. They calculate your monthly checks by multiplying that times the the daily barrel production of oil, pint, natural gas, LPG etc. Then this new number is multiplied times 30 (days) and the price of oil, or the other commodities. Does that simplify things for you?
Thank you jpw. Using your formula, the numbers came out to exactly what listed on the document. I guess the only question in the entire agreement would be the number of total acres they present as being the total “section.” Thanks again.
The big factor is what type of well was drilled - horizontal or vertical. My guess is it is a horizontal because you are in Reeves County. A normal section is 640 acres, but horizontal wells cross several sections now, so your percentage of the production area will probably be a smaller number than if it is a vertical well. You can use come math and determine that still by reversing the equation since you know all of the other figures.
Think I see why you might be questioning the number of total acres in the section. You didn’t mention which side of the section your mineral interest is on so I’m attaching the plats of both units Centennial formed there. The survey shows Unit A, that’s on the west side of the section, is a total of 310 acres, and Unit B, that’s on the east side is a total of 315 acres. That looked unusual since the two units appeared to divide the section in half, and that total of 625 acres for the full section doesn’t match the 640 acres the GLO shows as the original size of Section 247.
Maybe someone can explain this, or you can check it out with Centennial, but as long as your acreage amount is correct anything that made the total size of the unit larger probably wouldn’t be to your advantage.
It case it’s confusing, the survey plat describes those units being in Section 248 because that’s where the drill site was located but the first take point for production is across the boundary in 247.
Reeves - Centennial Ebay Unit A 1H H&GN RR Sec. 248, Blk 13.pdf (975.6 KB)
Reeves - Centennial Ebay Unit B 2H H&GN RR Sec. 248, Blk 13.pdf (871.8 KB)
The GLO original acreage is not accurate as the surveyors did not have exact tools. Looking at the plats, you will see that the lengths of the four sides are not equal and therefore the section is not square. An on the ground survey will involve finding the corner markers for a section or adjoining section and doing exact measurements. Some operators use “called” acreage which is the original or assumed acreage. Using an acreage calculator, it would seem that the section contains closer to 638 acres and the surveyor did not state the number of acres in the section after measuring the sides. He did not measure the individual lots. Instead the tract list acreage is “acreage supplied by Centennial”. Those lot sizes are definitely “called” and a mineral owner might well wonder about this. Since it is a unit well, there may be more information in the DPU filed in the Reeves County records.
My agreement lists 295.00 as the acreage total.
Your lease will have a legal description of the gross acres under which you own a fraction or percentage of the minerals. The 295 acres means that you do not own under all of Section 247. For example the description could be something like the E/2 of S/4 and the W/2 of N/4 or it could be a detailed metes and bounds description with details of starting in the corner of the section and thence 125 feet southwest along the section line… Almost all descriptions include “and containing 295 acres, more or less” to cover any differences revealed in a survey.
Tennis… yes, thank you. I don’t think I was being very clear. 295.00 was the TOTAL of all acres described, not mine personally.
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