Jay-Bee Oil & Gas has drilled a well and apparently I am due my first royalty check. I called them last week to get a status as to what was going on, since there was a new well drilled within a mile of my property. They said that I was due royalty, but needed a Division Order signed before they can pay me. They emailed me the Division Order, I need to sign it and get it notarized, and send it back to them.
I have several questions, but am getting ready to leave for a couple weeks, so I want to wait until I get back to discuss my questions with Jay-Bee.
But, my first question maybe someone can answer for me. How binding is the Division Order to what my royalty be? If I go ahead and send it to them, can I challenge it, if I need to, when I return and have time to do the research? Or, should I wait until after I do the research to sign the Division Order?
I know there is other questions, but I am going to be gone for two weeks, and don't really have the time to get into it now.
Thanks in advance. Denver Davis
Since I haven't seen your division order, I can't comment on it specifically. However, I am aware that some companies add language to a division order that changes things with your lease terms. I believe (not a lawyer) that the companies need a division order to "divide" the royalty payment for a well. If you own 100% of the royalty interest in all the acreage in the well, you are entitled to 100% of your royalty percentage. Etc.
The National Association of Division Order Specialists have a model division order form available on their website. As I understand it, you can download one and fill it in with your information and send it in instead of the one provided by the company.
Maybe someone else can add or correct information.
Of course, determining the correct amount (%) of the well that should come to you is more complicated. You need a declaration of pooling to see how many acres in the pool (total acreage for that well) your particular tract has, not necessarily your full leased acreage. Then you need to determine how much of the royalty on that tract you own. You might share an interest with several or many family members or other owners. And you need to know what royalty % your lease calls for.
If you have more questions, ask here and someone can probably help. Don't rush this.
Thanks Nancy for the info.
The Division Order has a first paragraph stating in bold/caps 'THIS AGREEMENT DOES NOT AMEND ANY LEASE OR OPERATING AGREEMENT BETWEEN THE INTEREST OWNERS AND THE LESSEE OR OPERATOR OR ANY OTHER CONTRACTS FOR THE PURCHASE OF OIL AND GAS'. Then it goes on to identify Terms Of Sale, Payments, Indemnity, etc. So I am thinking it may be OK. But I think I will wait until I get back before I sign it. I may see if Kyle can take a look at it before I sign it. Just for peace of mind.
Also, the order shows 25 pooled units for this well. Each identified like this; P#### - ##.###, each # sign being a number. I am assuming the P number is identifying a land owner, and the following number is the amount of acres in that specific pool (not total leased acres). Am I thinking correct? Thanks.
The wording in the first paragraph sounds ok. And about the Pooled Units: Your interpretation is probably a correct assumption.
Having Kyle look at this sounds like a great idea. He knows these things very well, and can help you calculate your interest in the pool correctly. I have had a situation where the company had my ownership incorrectly calculated and I had to show them where they were wrong, and have them correct it. Usually they are the ones who are correct but that time it was because their title attorney had neglected something. So take your time, get Kyle's input, then look forward to the checks (or direct deposits) coming in!
Hi Denver! I always make a few changes to DOs. They always want you to certify that the decimal interest is correct. That's a little disingenuous of them as you don't have all the necessary numbers to make that calculation. I always cross off the word "certify" and initial in the margin next to it. There's usually some language that says you'll either pay them back or indemnify them for any overpayments, or something along those lines. I cross that out, too, and initial next to it. I haven't seen a lot of JayBee DOs, so I don't remember all of their language off the top of my head. I'd want to take a look at the actual document because I'm remember that there are a couple other things that JayBee includes that you really shouldn't sign off on. I just don't remember exactly what they are.