After the company has acquired the oil and gas leases in the area it wants to exploit, it picks its initial drillsite and then engages an oil and gas attorney to examine the title to the drillsite tract. The attorney reviews all of the documents gathered by the landmen involving the mineral title to the drillsite tract and then gives an opinion, called a drilling title opinion , to the company.
If the drillsite consists of a pooled unit encompassing two or more smaller tracts, the drilling title opinion may cover all of the tracts in the proposed pooled unit.
Where the well to be drilled is a horizontal well, the drilling title opinion should cover at least all of the tracts that will be penetrated by the well bore. If it is successful and placed into production, then the company engages an attorney who may or may not be the same attorney as the one who did the drilling title opinion to prepare a division order title opinion.
The purpose of this second opinion is to tell the company how to pay the royalty owners, based on the record title ownership of the minerals and the oil and gas leases covering the well or pooled unit.
Where there are requirements, those owners affected by the requirements will not be paid until the requirements are cured. Remember that a title opinion is just that — an opinion. It is prepared by attorneys skilled in examining titles, but it may be wrong. First, it is based only on the documents provided to the attorney for review.
The attorney may not have seen documents that affect the title, or the attorney may have missed provisions in the documents that affect the title. Based on the division order title opinion, the company then prepares a division order for each owner entitled to payment on production from the well and sends it to the owner. The company personnel who deal with division orders are called division order analysts. When you call a company asking about your royalty payments, you are usually speaking to a division order analyst.
Depending on the complexity of the title, there may be a significant time between the completion of the well and the issuance of division orders — sometimes several months. Problems arose concerning the use of division orders because companies began using them for something other than their original purpose. These division-order provisions often conflicted with the terms of the oil and gas leases under which the royalties were being paid.
So litigation inevitably resulted. Courts were confronted with how to characterize and enforce signed division orders that conflicted with the terms of the leases. In Texas, courts have held that division orders are executed without consideration, but that they are an enforceable agreement until they are revoked.
A division order can be revoked at any time by either party, after which it has no further effect. So, if a division order provides that royalties shall be paid based on the net proceeds from sale of the production, less all post-production costs incurred by the lessee prior to sale, then the lessee is entitled to pay on that basis as long as the division order is in effect, even if the lease required the lessee to value the production in another way.
Like most legislation, the statute is a compromise. It provides that division orders cannot be used to modify leases, and it gives the companies the right to require execution of a division order, as long as it does not seek to modify the lease.
The statute then has an odd provision: I am not aware of any case dealing with this provision of the statute. The division order statute says that, if a company uses a division order that meets the requirements of the statute, it can refuse to pay the royalty owner until the royalty owner has signed the division order. If the payor uses the statutory division order form, it can be sure that it has no liability for failing to pay royalties if the royalty owner refuses to sign it.
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how to write dissertation proposals Division Order Cover Letter how to write a report essay thesis editing services philippines. Mineral owners should know the purpose of a division order, what rights and obligations it imposes on them, and the division order's relation to the oil and gas lease. the drilling title opinion may cover all of the tracts in the proposed pooled unit. Where the well to be drilled is a horizontal well, the drilling title opinion should cover.
ix d2 research paper outline for an author Division Order Cover Letter master thesis cite resume medical school admission. Division Orders Allocate Oil and Gas Revenue. A Division Order is an instrument which sets forth the proportional ownership in produced hydrocarbons, including crude oil, natural gas, and NGL’s. Sometimes the Division Order is referred to as a division of interest. More often than not, a single well or lease will have multiple owners.