Replies to This Discussion

Permalink Reply by Bob Zimmerman on April 5, 2018 at 7:31

<Bob, fee ownership is not relevant>>>

Point taken. 

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Permalink Reply by JM on April 10, 2018 at 0:06

When the well operator submits the "as drilled" well plat to the state, they include a "perf" letter that states the entire completed lateral length in linear feet, the linear feet lying in each unit and the percentage of production allocated to each unit.

Skip,

This is an interesting discussion.  I also have been curious about this.  When the "as drilled" letter is submitted to the state, do the mineral owners typically get a copy or do we not find out our percentage until a division letter arrives?  How should a mineral owner verify their "percentage of production allocated"?  

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Permalink Reply by Skip Peel - Mineral Consultant on April 10, 2018 at 1:25

JM, two separate but related issues.  You only get one Division Order because every well drilled in the unit has the same decimal interest for you.  You should request a copy of your unit survey or look it up in the state database, if it has been submitted.  You want to perform the very simple math to confirm your decimal interest is correct as to what appears on your royalty statements.

I don't think that your unit operator sends you a copy of the "as drilled" plat provided to the state but I don't know that for sure.  No one I have worked with as every mentioned getting one.  Once again you can go to the database for a copy.  The total linear feet of each well lateral and the percentage lying in each unit will vary.

Your operator will use the percentage of production in that "as drilled" perf letter to allocate and report production.  The SONRIS Data Well File for your well(s) will report production by an LUW code number which will show you how much volume is allocated to which units.  It will look like this:

LEASE\UNIT\WELL PRODUCTION

RPT DATE	LUW CODE			WELL CNT			GAS PROD(MCF)			PARISH
01/01/2018	617345			3			293510			DE SOTO
12/01/2017	617345			3			340473			DE SOTO
11/01/2017	617345			1			412907			DE SOTO
10/01/2017	617345			1			499692			DE SOTO
09/01/2017	617345			1			550334			DE SOTO
08/01/2017	617345			1			617590			DE SOTO
07/01/2017	617345			1			657624			DE SOTO
06/01/2017	617345			1			390089			DE SOTO
01/01/2018	617159			2			333125			DE SOTO
12/01/2017	617159			2			362184			DE SOTO
11/01/2017	617159			2			438803			DE SOTO
10/01/2017	617159			1			505763			DE SOTO
09/01/2017	617159			1			564776			DE SOTO
08/01/2017	617159			1			663885			DE SOTO
07/01/2017	617159			1			821317			DE SOTO
06/01/2017	617159			1			318706			DE SOTO

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Permalink Reply by Jesse Joyner on April 10, 2018 at 6:25

Always good advice, Skip. To be clear in regards to division orders, a Louisiana mineral owner will normally receive such a letter on each well in a unit. It's done this way because new horizontal alternate wells in a particular unit, including CULs, tend to have different decimal percentages due to varying lengths of the frack perforation. This was also the way it was done with old vertical wells and plain horizontals in one section, too. Operators benefit from the wording of division orders, which do not have to be signed by mineral owners in Louisiana per statutory law. It should also be noted that a mineral owner benefits from being able to check and verify the royalty percentage, even if he does not sign a D.O.    

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Permalink Reply by Skip Peel - Mineral Consultant on April 10, 2018 at 7:11

Jesse, your decimal interest in a unit should not vary by well.  It can change if the operator performs a new survey that finds inaccuracies in a previous survey, otherwise it is the same no matter how many feet of perforated lateral lie in your unit from multiple wells.  What varies is the volume of gas allocated to each unit for each of those alternate unit wells.  If you are getting a new Division Order, it would be because the decimal interest has changed.  There is a lot of that going around because far too many original unit surveys were not done properly.

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Permalink Reply by Jesse Joyner on April 10, 2018 at 7:43

Skip, I've seen this done repeatedly with many wells. And logic dictates that a mineral owner would be paid based upon the actual footage pulled out of a particular section that's "owned" per the varying lengths of the CULs that are drilled into different sections per the same unit well. Of course, I agree that a mineral owner will be paid a set percentage based upon the acreage owned in whatever section and based upon the amount of royalty specified in a signed lease. True. We agree on that. But with CULs, per most all such laterals being of different lengths in different sections, the operator has to divide up the production to fit. In other words, if a CUL only covers 25% of one section and 50% of another section, then it makes sense for the mineral owner in the 50% section to be paid a higher percentage of a well, even if the acreage owned by both landowners is exactly the same in each section, along with the same 1/4 royalty for both owners. So, yes, I've seen "correct" D.O. sent out by various operators where the percentages vary in the exact same section based upon the frack perforations. The land offices have confirmed that they calculate CUL royalty in this way, and it makes perfect sense. In other words, a D.O. doesn't define a mineral owner's royalty percentage for a section. Instead, it defines the owner's royalty percentage for a particular well. A D.O. is "well" specific. Before the HA, D.O.s did always repeat and define a section, since an individual NG well would only pull from one section/unit, as did the early horizontals that were drilled into only one section/unit. But with the new CULs, there's logic in D.O.s having varying percentages, since these are snapshots of what will eventually show up on a royalty statement per the varying pay percentages from each individual well. Also, I'm sure there are many landowners/mineral owners who can verify this accurate form of accounting with their D.O.s. Conversely, if a survey plate is wrong, that throws a wrench into the math, of course.  

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Permalink Reply by Skip Peel - Mineral Consultant on April 10, 2018 at 7:49

DOs are not required for each well.  And each cross unit well pays royalty based on the portion of production allocated to each unit based on the linear feet of perforated lateral located within each unit boundary.  The linear feet, and therefore the percentage of total production per well, can and does vary.  The decimal interest should not except in the case I mention.

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Permalink Reply by Jesse Joyner on April 10, 2018 at 7:58

Skip, in Louisiana, D.O.s are not required to be signed at all by landowners. Still, many, if not most operators, will send out D.O.s on each individual well. I've seen gobs of them on many, many wells from a handful of operators. They don't tend to send out D.O.s based upon inked leases and survey plates, etc. A mineral owner will only receive a D.O. when a well is actually drilled and put into pay. That's a fact that mineral owners deal with each time a new well is drilled.

Permalink Reply by Spring Branch,mineral owner on April 11, 2018 at 7:10

Skip, I'm not sure I agree with you on CUL's as the royalty interest is determined by the length of the productive lateral in each well within the 2 (or soon to be 3 Units).  The different well's laterals  are seldom the same length respectively within the Units involved.

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Permalink Reply by Skip Peel - Mineral Consultant on April 11, 2018 at 7:22

You don't have to agree.  But you should know that your decimal interest in a unit does not vary based on the length of any lateral.  Your percentage of unit production never varies, unless the operator re-surveys.  The volume of well production is what varies depending on the linear feet of lateral lying within the unit boundary.  I'm running out of ways to say this.  :-)

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Permalink Reply by Hopeful About Natural Gas on April 5, 2018 at 5:54

Thanks for posting this Katherine! It's in my area and I want to stay up with what's happening out there.

Thanks for the info in the replies, Skip and everyone.

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Permalink Reply by katherine dykes on April 5, 2018 at 6:23

this forum has been very helpful to us. skip is great what sction are you in?

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