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Permalink Reply by j garrett on April 15, 2010 at 4:21

3/16 = 3 divided by 16 = .1875 = 18.75 %.

You have to look at your Division Order to get you ownership %. The long decimal number will have calculated your ownership % based on your number of acres, your royalty (18.75%), and the number of acres in the unit. It makes it easy to multiply your % x production to get your $. The unknown variable out of your control is how much they sold the gas / oil for.

After paying out all royalties the Operator makes the rest, generally 75-85% if royalties were 1/6 to 1/4.

The Drilling company is generally hired as a sub-contractor by the operator and is paid to do the job. That's it. No residuals. Some bigger operators own the rigs but still hire a drilling company to actually use them to drill. Some own the rigs and the people, so to speak. Many different ways these things come together.

It is not profitable to keep a low producing well, or worse yet, hit a dry hole. That's why they make such a big %, to make up for the marginal or unprofitable wells. Not to mention their exploration and land acquisition expenses. They pay "land companies" big money to field all the landmen needed to run title and lease the land, plus the cost of the land (lease bonuses) they pay the land owners.

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Permalink Reply by 221caribbean on April 15, 2010 at 5:50

thanks j garrett! much clearer now.

Permalink Reply by The_Baron on April 15, 2010 at 3:06

Don't forget the occasional reworking of a well....new pumps, location maintenance, Salt water disposal, and so on.

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