We have a lease with EXCO for our wells in Desoto parish and we have been receiving royalties every month for awhile. This week we received division orders from Shell (SWEPI). The letter from Shell states, effective May 2018, Shell will began marketing its share of the gas produced from  wells located in various parishes in Louisiana and all of our wells are included. As a result, Shell will be paying royalties to us for their share of the production. We've never signed a lease with Shell, so we are not sure if we are suppose to sign these division orders. The letter also states that EXCO will continue to market its share of the gas and pay accordingly. My question is, has anyone else received a division letter from Shell, when you were normally paid by EXCO? Should we sign the division letter and return it? Thank you for your response, Cindy R       

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Under Louisiana mineral law you are not required to sign a Division Order.  In order to receive royalty payments you do have to provide your social security number so that the payments can be reported to the IRS.  In this case, EXCO should already have all your pertinent personal information from their royalty pay decks.  A number of years ago British Gas (BG) acquired a 50% interest in all of EXCO's Louisiana Haynesville leases.  Shell acquired BG and therefore that 50% interest.  Since EXCO is bankruptcy bound, Shell has been taking over their 50% of royalty payments.  This is not new news, you must be some of the last lessors to get the notice.

Skip Peel, You answered my question. Thank you for your reply

You're welcome, Cindy.

I just received a Division Order from Shell for Section 34 of 14/13, wherein the Royalty Interest on the Shell Division Order amounted to 25% of the original Exco Royalty Interest in the section..... so either it was not a 50/50 split on all Exco wells or my new royalty interest with Shell is understated.  It makes me mad that there is absolutely no way to take Shell's new Division Orders and check their math since they don't state what their percentage ownership was in their various wells in partnership with Exco.  Why wouldn't Exco also be required to issue new Division Orders since the Royalty Interest their payments are based on have also changed?  I frankly don't see what I gain by being put through this hassle!!!

I receive a call from a Shell lady in Houston based on my query and she stated ,"oh yeah, we only own 25% of those wells".  I frankly am not sure she knows what the heck she's talking about!  It was not a person in the Land Dept,

Shell acquired a 50% stake in whatever EXCO owned in the way of LA Haynesville Shale assets by way of acquiring BG.  So I think it possible that EXCO only had a 50% interest in that particular unit.  The question would then be, who owns the other 50%?  And if they are Working Interests, will they take over payment for their ownership interest?  That information may have to come from EXCO as opposed to RDS.

EXCO Resources, Inc. Announces Closing of Its Joint Development Transactions with BG Group plc in East Texas/North Louisiana

May 20, 2015

DALLAS–(BUSINESS WIRE)–Aug. 14, 2009– EXCO Resources, Inc. (NYSE:XCO) (“EXCO”) today announced that it has closed its transactions with BG Group plc (LSE:BG.L) (“BG Group”) for the joint development and operation of EXCO’s Haynesville shale and certain other related natural gas assets located in East Texas/North Louisiana and the joint development and operation of EXCO’s midstream assets in the same area.

EXCO sold BG Group a 50% interest in its producing and nonproducing assets in a large area of mutual interest (“AMI”) which encompasses most of EXCO’s holdings in East Texas/North Louisiana, excluding the Vernon Field in Jackson Parish, Louisiana and the Redland Field in Bossier and Webster Parishes, Louisiana. The parties will jointly develop the Haynesville, Bossier and other deep horizons as well as the Cotton Valley, Hosston and other shallow horizons. EXCO will continue serving as operator of the joint development subject to oversight from a Joint Development Operating Committee.

EXCO and BG Group will each own 50% of the acreage, production and reserves within the AMI. The existing assets within the AMI include approximately 120,000 net acres with approximately 65,000 net acres in East Texas and 55,000 net acres in Louisiana. Approximately 84,000 net acres are prospective for Haynesville shale development, and most of this acreage is in the core Haynesville shale areas of DeSoto and Caddo Parishes in Louisiana and Harrison County, Texas. Also included is net production of approximately 93 Mmcfe/d from the Cotton Valley and other shallower horizons and approximately 88 Mmcf/d from the Haynesville shale. As of December 31, 2008, the Cotton Valley and other shallow rights included approximately 414 Bcfe of net proved reserves and approximately 445 Bcfe of net probable and possible reserves, based on year-end SEC pricing. The Haynesville/Bossier shale acreage is under development and EXCO estimates that its current acreage position, most of which is held by shallow production, includes over 1,600 undrilled Haynesville locations containing net potential reserves of 4 to 6 Tcfe, with significant additional potential in the Bossier shale. EXCO and BG Group plan an aggressive development program, particularly in the Haynesville shale, for the remainder of 2009 and in future years.

EXCO received $727.0 million in cash at closing pursuant to the upstream joint development transaction, including closing adjustments. In addition, BG Group has agreed to fund $400 million of capital development on EXCO’s behalf, with BG Group paying 75% of EXCO’s drilling and completion costs on the deep rights until the $400 million commitment is satisfied. The drilling and completion cost commitment is expected to be satisfied in 2011 or 2012. EXCO and BG Group will share equally in additional leasehold and asset acquisition opportunities within the AMI.

EXCO also closed the sale to BG Group of a 50% interest in a newly formed company that will hold the East Texas/North Louisiana midstream assets, exclusive of the Vernon Field midstream assets. EXCO received a special distribution of $269.2 million at closing, including closing adjustments. In concert with the planned Haynesville shale development, there will be an effort to develop and grow the midstream business. EXCO currently owns in excess of 700 miles of pipeline and gathering assets in the area and is constructing a 29 mile, 36” diameter header system to transport its Haynesville gas production. Throughput in the midstream business to be contributed to the joint venture is approximately 482 Mmcf/d of which 51% is EXCO gas and 49% is third party gas.

 

Decimal interest in a producing well or unit is straight forward, basic math.  Your acreage divided by the unit acreage times your royalty fraction.  The problem is that most folks don't do that math when they receive a Division Order.  You know what you think you own acreage-wise, you know your royalty fraction and the DO provides the unit acreage.  Do the math and see if it matches the decimal interest on the DO.   If not ask why.  It is quite common for there to be slight differences.

If the unit operator does a proper, on the ground unit survey, it will include the individual tracts within the unit boundary.  Unfortunately that doesn't seem to be happening with Haynesville Shale units in LA.  If the proper survey method is employed and the individual tracts are surveyed, it is common for a tract acreage to be somewhat different from the legal description in a deed, a lease or any other conveyance instrument.  I'm working on a case now where a legal description states 55.0 acres and the unit operator only credits the tract with 46.  The legal description is so poor, it is impossible, so far, to figure out the total acreage it describes.  If you have a metes and bounds description and it doesn't "close", a description that omits pertinent details such as distances or a survey that has been copied from one instrument to the next for decades, it is likely not accurate.  Surveys are not cheap but often if the difference is significant, one may be worth the cost.  If your decimal interest does not compute, ask your unit operator is they performed an on the ground survey of your tract.

I am one of the "didn't do the math" dummies.  I just learned that I have been getting 1/4 the royalty interest I own.  This error dates back to 1956..The $$$ amount in lost revenue is huge.,  There is a 4 year limit on recovering $$$  and since the price and production has dropped to a pittance in past 4 years not worth effort to try to recoup.

I have wondered whether I can recoup if there is ever enough income from the lease to bother..I mean..have company pay me instead of the lease that got the 3/4 of my royalties for that 62 years.

But right now 3/4 of nothing is still nothing.

be very wary / careful when signing division orders.
This is a legal document...whatever this order states is what you agree to.

example: Division orders stated paying on 0.0088800 ( example)on lease (my share of the acres in unit)
So how many acres does this decimal number represent?

You need to call oil company customer relations and find out. If you own 150 mineral acres does this decimal number calculate to that amount?

I found out that this decimal order on mine was 89 acres less then I actually owned..so if I had signed I would be agreeing to this.

The formula for converting this decimal interest into number of acres is tricky so get it figured out before you sign. Also division orders can change conditions of your actual lease.. well worth seeing an attorney if oil comapany does not help.

never listen to any one who says "oh sign here its just a fomality"..aqnytime your signature is needed you are giving away something. no matter if it a tangible something or a right..you giving up.
We actually got a check from bankruptcy court on behalf of Exco in May 2018. We have not received a division order from Shell but a friend of mine called me yesterday and said she received her division order from Shell in same section we are in
"Under Louisiana mineral law you are not required to sign a Division Order."

Are you required to sign Division Orders in Texas?

For those who may not want to do the math in this case there is an easy way to determine if the numbers are good.

1.  Take an old Exco statement find your percentage of ownership.

2.  Take the latest Exco statements and Shell statements and add the percentages of ownership together.  The total should be the same as the old Exco statement.

Shell is having some growing pains.  One month they shorted every well from 10 to 15% in volume.  I sent them a spreadsheet and they fixed it the next month.  If you are 50%/50% it is easy to determine if there is a shortage.  The severance tax should be the same on both checks.  I suggest you you verify each check.

You also may get the same division order several times.  I talked to Shell and they said they had 2,500 division orders to send out.  They were sending them out in batches and it was easier for them to just resend all the orders with each batch.

I have noticed that the price is a little lower from Shell and they add a transportation charge on those wells that have expenses removed.

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