What Is an Oil and Gas Division Order?

If you own mineral rights and your land begins producing oil or gas, you’ll likely receive a division order from the gas company before your first royalty payment. This document helps confirm your interest and outlines how you’ll be paid for production from your well or pooled unit.

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For many oil and gas owners, this step confirms that their mineral title is officially recognized in production records. Before signing a division order, you should understand what it is and what to expect. Keep reading to learn more about this document.

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Key Takeaways

• An oil and gas division order is a legal document that outlines how the mineral interests or production revenues are divided between the mineral owners and the oil and gas company.
• A division order usually includes the terms of the lease, the royalty rate, terms in the event of a delay, and any other bonuses.
• When you sell or lease your mineral rights, you can maximize their value by getting expert help, marketing the rights, and reviewing every offer before making your final decision.

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What Is a Division Order?

A division order is a legal instrument that shows how mineral revenues are divided between the owner of the mineral rights and the oil and gas company. It lists each party’s share of the income from production, based on the percentage of ownership or lease agreement. 

Before payments begin, the oil or gas company usually sends this document to the mineral owner for review and signature. By signing it, the owner confirms that the information, such as their mineral ownership interest, name, and payment details, is correct.

A division order is made after a well has begun producing, and the royalty owner’s receipt of this document is often the first sign that a well has begun to produce. An oil and gas attorney can help you ensure the agreement is accurate before you sign.

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Division Order Title Opinion

Before the division order is made, there is a separate document created to lay out all of the ownership interests and each owner’s decimal interest. In other words, the document says who is owed what percentage of the production revenues. These orders are typically prepared by oil company personnel called division order analysts after a well has begun producing. 

Meanwhile, you may want to know who will be owed what percentage of a producing well’s revenue before that well has actually begun to produce revenue. That information is generally reflected in the drilling title opinion, which is prepared before any drilling operations begin.

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What Is Included in a Division Order?

Due to the complex nature of mineral rights, it is important to have all agreements and arrangements in writing. A division order is one way to ensure that you are properly paid for the appropriate rate originally agreed on. It usually includes the following stipulations:

• Terms of the lease
• Royalty rate
• Any bonuses
• Terms in case a delay occurs
• “Shut-In royalty” agreements

By hiring a mineral auction representative, you will be able to find competitive buyers who are willing to offer higher rates for your mineral rights. A broker will be able to walk you through the mineral rights process and work with you to find the best situation for your land.

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Net Revenue Interest or Decimal Interest

Two terms that you may come across on your division order are your net revenue interest (NRI) or decimal interest. They might sound confusing, but they refer to the same thing: the royalty owner’s share of the production revenue, your share. Keep in mind that your NRI represents your share of the revenue after certain costs are paid. This makes it different from royalty interests, which are a portion of the total revenue.

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Should You Lease Your Mineral Estate?

Before a division order comes into play, you’ll need to decide whether selling or leasing your mineral rights is the right decision for you. 

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Leasing Your Mineral Rights

Unlike selling your mineral rights outright, leasing gives you the chance to earn regular income for a set period. These payments can increase if production grows or if oil and gas prices rise. However, they can also decrease when production slows down or market prices fall. 

Oil and gas companies may acquire leases near a proposed well to ensure ownership of the minerals in that area, and that can drive up prices. On the other hand, if there is no reason to suspect your land will produce minerals, then you may not be able to access a lease at all.

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Selling Your Mineral Interests

Selling mineral rights may be in the owner’s interests for many reasons: selling grants owners access to a lump sum for their rights, also ensuring they’re protected from future market volatility. While a producing well is generally more valuable than an unproven plot, you may still be able to sell for a considerable amount, even if your land has never produced minerals.

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Getting the Best Price From Oil and Gas Companies

The value of your rights depends on several factors, including market demand, location, and the type of minerals found beneath your land. Here’s how to lease or sell your rights for maximum value:

1. Get Professional Guidance – Partner with a knowledgeable mineral rights broker or work with a reputable auction company to help you attract serious buyers and secure the best possible deal.
2. Market Your Mineral Rights – Effective marketing can increase the quality and amount of offers you receive. When marketing, highlight the value and potential of your property to draw more interest.
3. Negotiate Confidently – Strengthen your bargaining power by understanding the true market value of your mineral rights before entering discussions.
4. Review All Offers Carefully – It’s common to receive proposals from multiple buyers. You should take your time to compare each offer in order to get a higher pay.

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Make the Right Choice as a Mineral Owner With Help from a Mineral Broker

When it comes to managing your mineral rights, every document matters, especially those that outline how you’ll be paid. Leasing your rights may involve a division order. Oil and gas rights owners who pay attention to these details can avoid payment issues and make better long-term decisions for their land.

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If you’re looking to sell mineral rights or explore your options, The Mineral Auction can help you connect with serious buyers and guide you through the process. Our experienced mineral brokers will review your oil and gas lease to make sure it serves your best interests and helps you secure a competitive offer for your property. With expert support, you can confidently maximize the value of your oil and gas rights.

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If you want to get the best possible price for your oil and gas rights, let The Mineral Auction help you find serious buyers.

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