Two Questions re: Division Order Decimal Interest and how it is determined and timing of royalties payments

Hello Folks, It has been a while since I asked for your assistance. With the Milliken Wells producing I have a question regarding how Gulfport comes up with the Decimal Interest. We noted on our Division Papers that on each of the three producing wells that our Decimal Interest is a specific decimal number. Does anyone know how the company arrives at this number?  In the Milliken Plat of 830.103 Acres we have but 1.521 percent (our acres are 12.626) and thus I was wondering if someone could speak to how the company arrives at the Decimal interest by using our specific information as an example.

One other question is in regards to the timing of returning our Division Papers. Does the oil company hold the money owed to a particular property owner if he or she is slow at returning the division paperwork? I would imagine that they must. My question is more in regards to how they "catch-up" with paying the royalties if someone returns the paper work after some neighbors have already received their royalty checks for 2013 and 2014.. Do they catch-up and pay in one check or pay according to each of the three wells?  We are not new owners. We have owned the land since 1975 but just sent in the division papers recently due to needing to clarify something on our deed. Now this is straightened out and thus we were wondering if they catch-up with past due royalties right away or do they wait for some reason. Anyone have knowledge of such a situation?  Thanks for your help on these two issues.  Sincerely, T.

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Permalink Reply by Frank Walker on February 9, 2015 at 5:35pm

Teri what's up!!

If you divide 12.626 acres (your participation) by 830.103 acres (total unit size), and then express that outcome as a percentage, you're gonna come up with the fact you are proud owner of 1.521% of the unit.

You could do this computation on paper the old fashioned way using long division.  But it's much easier and faster doing it using a small, hand held, calculator!  

Permalink Reply by Dexter Green on February 9, 2015 at 5:49pm

I'll take it one step further, building of what Frank said.  Your percentage of the unit is 1.521.  To find your NRI you need to multiply that number by your royalty percentage.  Example:

12.5% LOR x 1.521 = .19%

15% LOR x 1.521 = .22815%

20% LOR x 1.521 = .3042%

Permalink Reply by David on February 10, 2015 at 2:32am
If all of your acerage is not in the unit you must also take that into your calculation
Permalink Reply by David on February 10, 2015 at 2:35am
For example if you lease 100 acres and only 12.5 acres are in the unit you must first divide 12.5 by 100 .125
Permalink Reply by David on February 10, 2015 at 2:37am
The above applies if your state follows the rules of apportionment.
Permalink Reply by Frank Walker on February 9, 2015 at 5:43pm

Teri on your second question:

This does not have a precise mathematical answer like question #1.  The answer depends on the wording of your lease and on your Lessee, too.  Some Lessors are hesitant to return division orders out of concern the paperwork could alter their lease provisions.  And I guess with some of the underhanded, dishonest gas companies that might happen.  I returned my division orders straightaway after reading a couple of times and finding nothing untoward.  But, again, this is gonna vary depending on a bunch of stuff.  Be careful and keep your eyes wide open!

BTW, some landowners even take in their division orders for their lawyer to review.  I didn't do that, but if it's what helps other folks to feel comfortable and secure, who am I to judge and tell them "no".

Permalink Reply by Philip Thackray on February 10, 2015 at 1:45am

Teri,

One further tiny clarification, your decimal interest will be presented to you as a decimal.  Dexter's numbers would become:

0.19% > 0.0019

0.22815% > 0.0022815

0.3042%> 0.003042

Phil

Permalink Reply by Philip Thackray on February 10, 2015 at 2:14am

Matthew,

Ha Ha!

FWIW, I see royalty payments from Rex and XTO, both of their check stubs show the owner's decimal number.

Phil

Permalink Reply by Don C on February 10, 2015 at 3:24am

LOL     Isn't that Aubrey forefront before his hair grew long?

Permalink Reply by Robert Allingham on February 10, 2015 at 5:25am

Mathew Santiago, Thanks for giving me a great chuckle! that picture really is worth a thousand words.

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