Inverness, FL asked in Energy, Oil and Gas for Oklahoma

Q: I don't agree with a Division Order's interest. What are my rights?

I wrote "Disputed" on the Division Order and sent it back after inheriting a portion of the lease. Producer (Butkin Oil) takes 80%, by their own admission and won't say where the other 20% goes. My owner interest is less than .002%. It also appears that I am paying state taxes for the total property gross value and again on owner gross value.

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1 Lawyer Answer

Richard Winblad

PREMIUM
Answered
  • Edmond, OK
  • Licensed in Oklahoma

A: Oil and gas law is complicated. The operator typically has the lion's share of the revenues because it pays for all the expenses and therefore has all the risk. If they spend a million and the hole is dry they eat all of the cost. However, a royalty interest owner pays nothing.

The number you are looking at is the Net Revenue Interest.

Next is the amount of acreage you own. Even if you lease has wording "containing 40 acres", this does not necessarily mean that you own that many acres. Most people own a fractional interest within the legal description.

The next question is the size of the unit where oil is produced. This could be a 160, 640 or even a 1280 acre spacing unit. All owners within the spacing unit is entitled to their fractional share.

Finally, what is your royalty rate. 1/8=.125, 3/16=18.75, 1/5= .20, 1/4 = .25. This is found in the lease or pooling order.

All of these things go into determining your decimal interest.

Net Revenue Interest = Net Mineral Acres / Drilling Spacing Unit Acres * Royalty Rate

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