Division Order
A Division Order Divides up the Oil and Gas Revenue
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. It’s not uncommon in fact to have hundreds of parties owning an interest in a single well. A Division Order is generally received by a mineral rights owner through the mail within 3 to 4 months after well completion.
Receiving a Division Order is a Good Thing!
If you’ve received a Division Order, it’s as a result of production having been established from property in which you have an interest. From the mineral owner’s perspective, receiving a Division Order is a good thing!
Division Orders Ensure Oil Companies Pay the Right People
Imagine the headaches and costs of improperly distributing a well’s revenue. It’s in everyone’s best interest to get this right. The Division Order is a document whereby the revenue distributor (either the Operator or the 1st Purchaser) and the recipient (the royalty owner) agree on the exact decimal interest owned within a well, lease, production unit, or field-wide unit. A Division Order doesn’t alter the terms of the mineral lease. A Division Order that attempts to amend the terms of the lease is invalid to the extent of the attempted change.
Division Order Title Opinion
The oil company has done some homework prior to sending you a Division Order. Either an in-house attorney or a third party law firm has analyzed the supporting documents relating to the mineral title associated with a producing property. This is generally known as the division order curative process; in other words, curing any defects in title.
The Division Order Analyst
Division Order Analysts are the individuals responsible to administer the proper establishment and maintenance of ownership records. Analysts are generally organized within the land department within an oil company. As a royalty owner, the Division Order Analyst is generally the person within the oil company with whom you will have initial contact with respect to getting in pay status.
IRS Tax Form W-9 and Division Orders
Of course, Uncle Sam will want his share of your share. So that the revenue distributor will know how to tell the feds how much they paid you, you’ll need to complete the W-9 form
(W-9 Form PDF File). Usually an oil company will withhold approximately 30% of the revenue if you don’t fill this out. You can also talk about division orders with other mineral rights owners by visiting MineralRightsForum.com
Additional Reading
- Volume Verification – Short article explaining how oil and gas royalty owners can verify their oil and gas production. Includes links to free state verification.
- Production 101 – Free article explaining the drilling, completing, and testing of oil and gas wells in nontechnical language. Valuable insight for mineral rights owners.
