We had a Natural gas lease. The divison order, on the 160 acres plat , show ownership of .00694. This was in 1987.
Natural gas production was so low and with the prices dropping, the wells were plugged in 2009.
An oil company enters the picture.
Using the exact same description, gave us all leases, with 3/16th rolayty and so much per acre bonus money.
They are now producing oil from the same hole the Natural Gas was producing from.
However, now they are showing our royalty share is merely, .00222779. When I ask how that number came about, and giving them the previous number from 1986,.00694, I was told that it has to do with spacing.
They leased the same 160 acres, the well is on the same spot, so how come the numbers changed so much? What am I missing.
JJ, Hard to figure without knowing the size of the drilling unit and how many acres you have leased. Just because the original tract was 160 acres does not mean that is how much you own or that is the size of the drilling unit. A spacing order from the OCC determines the size of the unit.
Your acreage divided by unit acreage times royalty fraction=Net Royalty
I just don't know why it would change, when its on the exact same spot, in the same 160 acre lease.
Yes, they are telling me the spacing is only 40 acres of the 160, but, the lease is for the 160.
Can they really tie up an extra 120 acres, and only pay royalties on the 40 where the well is actually located? If that is true, when the lease is up and they have no plans to drill additional wells on any of the remaining 120, can we get those acres out of that lease?
JJ,
You own 1.18815% of the acres in the 40 acre oil unit.
or, 0.475 net mineral acres in the unit. If the same ratio applies to the entire 160 acre parcel, you should have about 3 net mineral acres overall. Now, if you had a 1/8 lease to begin with for the old gas well, your decimal interest would have been close to 0.00222779. To confirm the 3 net mineral acres take the bonus amount paid and divide by the bonus/acre. I'll bet it is close to 3 acres.
If you can confirm that you own close to 3 of the 160 acres, the new well Division order is accurate.
Don't worry abut development of the 120 acres. If the oil is there, it will be developed if it isn't, it may not be worth your worry.
Gary,
Just taking the numbers and running them in the royalty calculator, its not much to be worried about for sure. I am only trying to get it straight in my head.
I do apologise by the way, our share is, 00222779 x 2. Their lawyer has to give the ok to hand over Moms share. She quit claimed it over, but, was a mistake on that paperwork, so they had us file one of those Affidavit of death and Heirship.
With that information, you may have as many as 6 net mineral acres. Please ask the operator for a redacted copy of the Division Order Title Opinion. That should tell the entire story as to what they think your interest to be. It should confirm what is in the court house, Gary H
JJinNewkirk said:
Gary,
Just taking the numbers and running them in the royalty calculator, its not much to be worried about for sure. I am only trying to get it straight in my head.
I do apologise by the way, our share is, 00222779 x 2. Their lawyer has to give the ok to hand over Moms share. She quit claimed it over, but, was a mistake on that paperwork, so they had us file one of those Affidavit of death and Heirship.