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Permalink Reply by Gringo on June 4, 2014 at 9:34am

The difference you see on your D.O.s  is the 4 companies different interest amount, your portion of the equation does not change. Your final decimal interest is only changed because of their interest is different in the equation. All added together represents your true decimal interest in the unit.

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Permalink Reply by James Foster on June 4, 2014 at 12:51pm

You are a royalty owner and receive a certain percent based on your lease.

Companies have agreements with other companies  One example is Chesapeake gave DPS Penn royalty interest in the group lease we signed because they acted as land men for them in this area.  If Chesapeake signs 500 - 1000 leases in our area inone group signing and actually there were many and DPS Penn gets shut out of all of that after they had been here gathering up leases for two years well it may have violated the contract they had with DPS Penn so they give them the same % they would get if they did the individual signings.   DPS Penn workers came to mass signing and helped to run it. 

Companies take on investors (joint venture) and they may have royalty interest like you. For example Chesapeake with Total SA (France).  Total does not come here to work but gives operating cash to Chesapeake and for that they are given a % royalty interest in every well or a certain group of wells.

Companies may also do a joint venture with a company that will be doing work on the wells.  This is a working interest not a royalty interest.  These companies will also be responsible for a percent of the bills incurred in operating a well. 

There may be other examples I have not mentioned.  I know that royalty interest like my first two examples are recorded in the recorders office. I am not sure about working interest but I believe that too is recorded.  We just did not have that happen with our lease so I did not see the records.  We did see DPS Penn and Total recorded.

So basically you have sales from oil and gas = 100% a big circle, the entire pie.  Now you take the 12.5-20% for landowner based on lease, and the different percentages you have promised to other royalty owners aka investors, land men, etc and any percentage you must pay to people with working interest.  What ever percentage is left goes to original company listed as owner/operator on well.  But in the end it must add up to 100%

So you have one other issue to deal with.  Based on each landowners lease and I suppose the agreements with investors you have gross sales and net sales (minus all the expenses of drilling operating, pipeline, the advertising you see on TV, the money given to schools and food banks here, etc.)  Is your percentage calculated with no deduction for expenses, some deductions, all deductions?  And what about the other leases and agreements in your unit.  Working interest folks do pay a percentage of all expenses whereas a royalty owner may not. 

So what you are getting would be the same no matter how many people are involved.  You are getting say 18% (from your lease) out of the 100% and the other 82% may all go to well owner or it may be divided up among others they have gone into business with in some way.  You can not get more then 18% of the sales. Gross sales vs net sales should be in your lease.  Gross vs net sales is somewhat of a bone of contention as to what exactly gross sales vs net sales includes.  Lease language is important but companies have attorneys too and they put things in the lease especially regarding this to exempt some thing ... the one example I can think of that I have seen in a lease is transportation cost ???  Well that is somewhat vague.  What exactly does that include ... building a pipeline to gather all the wells in area to transport gas to processing?

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