Replies to This Discussion

Permalink Reply by Les Bamburg on October 23, 2009 at 17:30

Cassie, the royalties are distributed in the same manner for all wells in a unit. A royalty owner is paid a percentage on each well's production (revenue) no matter where the well is located in the unit.

Example - if you signed a lease for 64 acres in the 640 acre unit and have a 20% royalty rate, then you would receive 2% of the revenue for each well in the unit (64/640 *20%).

Permalink Reply by GoshDarn on October 23, 2009 at 20:21

Cassie:

What Les is saying is: The royalties are divided equally per all owners in a section/unit, i.e., based upon an owner's percentage share of a section/unit.

With unitization, all the landowners/mineral owners in a unit reap the royalty income for all the wells drilled in a unit/section. It's one big pie that's divided up by the percentage of acres someone owns in a section. So, if there's even one small acre in the corner of a section and the well pad is almost a mile away at the other end of a section, that one acre would still get a fair percentage share of that well's production (and all future wells in that section).

Permalink Reply by Dion Warr, CPL on October 30, 2009 at 3:07

Cassie:

Royalties are accounted for on a proportionate basis as stated by Les and GD above. Most of the operators will send statements along with the royalty check which account for the production and sale of oil, gas, and condensate associated with each well. You should see a listing or breakdown for each producing well located within your unit. In either case, wells completed to the same zone or formation that are located within the same unit are almost always going to be paid at the same royalty fraction (unless you have some other contractual arrangement, which individual landowners almost never do).

Remember, though, all landowners in the same unit will get paid on a proportionate basis as to each well in the unit. If the unit boundaries do not coincide with the section boundaries, it is possible that you will not be paid on a well located in your section.