Division Orders
You may have received a Division Order in the mail. Not sure what it means? Well, you’ve come to the right place—we’ll be discussing the ins and outs of Division Orders in this post, so read on to learn more!
If you own producing mineral interest, meaning that your minerals are currently covered by either an Oil and Gas Lease or a Pooling Order in a producing unit, then you may have received a Division Order. A Division Order is a document that is used by the Operator of a well to make payments from the proceeds of the well to the royalty interest owners. The Operator owns the right to drill and produce a well, and is typically an oil and gas company. Sometimes, multiple oil and gas companies will own leases or working interest in a unit. When this happens, an Operator will be designated, and is generally the company who owns the most acreage in the unit.
The Operator is responsible for making production profit payments to all interested parties in the well, which includes other working interest holders, overring royalty interest holders, and mineral interest owners. Click HERE and HERE to learn more about these parties and their ownership interest in the well. Operators use Division Orders to make these production payments.
In Oklahoma, Division Orders are required by law to include the following information:
Your name
Your address
Your social number or tax identification number
Your division of interest, which is the amount of mineral interest you own in the producing well
A provision requiring notice of change of ownership—for example, if you sell your mineral interest, then you must notify the Operator
Division Orders may also contain additional provisions, and may even include terms of payment more specific than provided in the lease, like purchase price deduction provisions or minimum payment provisions. Note that if any terms of the Division Order conflict with the terms of your lease, the conflicting terms found in the Division Order are not valid, unless you have previously agreed to these changes. Your specific mineral interest in the producing unit will also be included on your Division Order and is reflected as a “division of interest,” or DOI, which is reflected as a decimal interest. Click HERE to learn more about how your DOI is calculated.
In some states, royalty owners must execute a Division Order before the Operator will make royalty payments. In Oklahoma, however, you are not required by law to sign the Division Order. The only prerequisite to payment in Oklahoma is that you have marketable title. You will also need to fill out a W-9 for tax purposes before you can start receiving payment.