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Permalink Reply by jffree1 on July 24, 2010 at 6:48

David, are you talking about a production sharing agreement whereby several (two or more) previously established units are agreeing to share in production from wells in a new (merged) unit? If so, everyone already in one of the old units would share in royalties from any well in the new unit, no matter where the well is located.

If you are talking about a standard pooling agreement, your 100 acres would be divided by the total acres in the unit to find your percentage interest in the unit. Multiply that by your royalty % to find your royalty fraction which you then multiply X total mcf's of gas produced each month X price realized.

If you own the entire interest:
100/acres in unit x royalty x monthly production x price = gross royalty - deductions = net royalty

Example:
100/640=0.15625 x .25 = 0.0390625 X 150,000 mcf x $4.00 = $23,437.50 (gross)

It still works the same way under a production sharing agreement but, now, the total acres in the (merged) unit are more than before which makes your fractional share smaller but allows the operator a better configuration in which to situate more wells for you to share in (hopefully).

Same for an agreement to pool acreage into a larger than normal unit.

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