Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on November 15, 2014 at 16:57

Your net acres in a drilling and production unit divided by the number of acres in the unit, times your royalty percentage.  Your decimal interest is how your payments are calculated.

Simple example:  You own 10 acres in a 700 acre unit (10 divided by 700 = 0.0142857)  times a one fifth royalty (0.20) = 0.0028571.

Permalink Reply by Ettie Ruth Pate on November 16, 2014 at 9:49

I am a little confused. Received two division orders with two different "decimal interest" amounts which is on the same survey and not sure how it is divided into two different amounts. Also, when calculating the payments, the royalty  is not used as a whole? Doesn't that cut your royalty checks down to smaller amounts? Also was told by a friend that if we have 72 acres of which we get half of the royalty that we would only get half of 36. Seems like we would get 36 acres instead of half of 36. I just received these on Saturday and will call the number on the division order tomorrow to have them explain it. Just curious as to how this is calculated. I am sure that the attorney with XTO is right about all of this. On our orders, does not amend any lease or operating agreement between the undersigned and the leesee or operator or any other contracts for the purchase of oil and gas. We have been patiently waiting for this to arrive and just would like to know what to expect as far as payments. May not be much. I suppose every little bit helps. Question --- when calculating how much the checks will be, do you use the royalty (22.5) times the production or do you use the decimal interest times the production? 

Permalink Reply by Skip Peel - Mineral Consultant on November 16, 2014 at 11:26

You sold 77.5% of your mineral interest when you signed your lease.  Now you retain 22.5%.  If you convert the % to a decimal, it is 0.225.  Unless you own a 100% interest in the tract covered in the lease, you own some fraction of the whole.  Therefore the lease may give the legal description for a tract of 100 acres but you may only own one eight of the whole which would be 12.5 acres.  It is common for tracts in East Texas to have been divided many times down through the years by mineral reservations and by division among heirs,  I don't know why they would send two DOs. 

Permalink Reply by Ettie Ruth Pate on November 16, 2014 at 12:52

The division orders are for the same well. Description is the same. Just different decimal interest amounts. We fought for the 22.5% royalty. I was under the impression that we still had 72 acres and would get the 22.5% for the royalty for half of it.

 

Permalink Reply by Skip Peel - Mineral Consultant on November 16, 2014 at 12:56

It is possible that you own an interest in 72 surface acres but only 36 mineral acres.  Texas allows the mineral estate to be severed from the surface estate in perpetuity.  A predecessor in your title may have purchased the surface tract decades ago from a seller that reserved one half the minerals.  That's very common.

Permalink Reply by Ettie Ruth Pate on November 17, 2014 at 7:48

I will check our deeds, etc. From what I can recall, the acres were sold but my dad retained the mineral rights or royalty on all of it. I know there are fine lines and ways to not get what you think you own. Hopefully will come out good. I have a call in to the Division Orders Rep. to find out exactly how all was figured. Only a friend was telling me we got only half of 36. Not sure how he would know for a fact. Thanks for all your opinions and for relying. I am becoming more knowledgeable searching the internet and lots of information to be read.

Permalink Reply by Skip Peel - Mineral Consultant on November 17, 2014 at 9:02

Unless your friend is a title landman or a division order analyst kindly ignore their comments.  Every family should keep a file of documentation covering mineral rights.  This is a good time to put yours together.

Permalink Reply by Ettie Ruth Pate on November 17, 2014 at 12:40

You are correct Skip!! I got in touch with the division order representative at XTO and now have a better understanding of what we have. Thanks for your input. 

Permalink Reply by Skip Peel - Mineral Consultant on November 17, 2014 at 13:14

Ettie, it's good to know that you received an acceptable explanation from XTO.  It's always a good idea to contact the operator with questions regarding your royalty payments.  However allow me to point out that you need to find and keep the public record documents regarding your mineral interest for future generations.  Far too many royalty recipients think that the information contained in their monthly royalty statements is all the information needed to validate their mineral ownership.  That information (owner number, decimal interest, unit name, well name, lease number, etc) is not a substitute for the conveyance documents that establish ownership and define the asset owned.  I'm currently performing research for 24 mineral and royalty interests in four Louisiana parishes from the 1940's for transfer to a trust and the royalty statements for those interests are basically of little help.

Permalink Reply by Ettie Ruth Pate on November 19, 2014 at 11:40

I found out the reason I got two division orders were that there are three tracts of land. One tract was for a large tract and the other had two smaller tracts. There was a different decimal interest for the two division orders. Why this was not put in one tract? I do not know,  but since they know what they are doing I will take them at there word. It all added up to the acreage in our tract of land and to the net mineral interest. A representative went over all of it with me and I have a better understanding of it all. 

Permalink Reply by Skip Peel - Mineral Consultant on November 19, 2014 at 12:01

Congratulations for getting the answers to your questions.  You did what all mineral lessors should do to be a good steward of their mineral interest.  And XTO did what they should do to provide you with the answers and explanations you needed.