At some point after a well starts producing on your minerals, you'll receive a division order from the operator. It looks like a simple form, and most people sign it and send it back without much thought. But it's worth reading because it determines how much you get paid.

What a Division Order Is

A division order is a document that tells the operator (or the purchaser of production) how to divide the revenue from a well or unit among the interest owners. It specifies your ownership percentage as a decimal interest.

For example, if your division order shows a decimal interest of 0.00125000, that means you receive 0.125% of the revenue from the well (after royalty calculations). That number is based on your acreage, your royalty rate, and your proportionate share of the unit.

What It Is Not

A division order is not a lease. It does not create or modify your mineral rights. It does not change the terms of your lease. It's an administrative document that tells the operator how to cut the checks.

Most states have statutes that explicitly say a division order cannot be used to change the terms of a lease. If your lease says you get a 3/16 royalty and a division order shows 1/8, the lease controls. But you need to catch the discrepancy.

What to Check Before Signing

Your decimal interest. Does the decimal match what you believe your ownership to be? If you know your acreage, your royalty rate, and the unit size, you can calculate a rough check:

(Your net mineral acres / Total unit acres) x Your royalty rate = Approximate decimal interest

If the numbers don't match, ask the operator to explain the calculation.

Your name and address. Make sure they're correct. Checks go to the address on the division order.

The property description. Confirm it matches the property you own.

The effective date. This is when the division order takes effect. Revenue earned before this date may be handled differently.

Any additional terms. Some division orders include clauses that go beyond the basic allocation of revenue. Look for language about indemnification, warranty of title, or payment terms that seem unusual. In most states, you can strike those clauses and still sign the division order.

What Happens If You Don't Sign

If you don't sign the division order, the operator may hold your payments in suspense. They know you're owed money, but they want written confirmation of where to send it and that you agree with the decimal interest.

That said, you should not sign a division order you believe is incorrect. If the decimal is wrong, contact the operator's division order department and ask for the calculation. Don't sign it just to start getting checks. Once you sign, it's harder (though not impossible) to dispute the interest later.

When Division Orders Change

You may receive a new division order if:

Each time, compare the new decimal to the previous one. If it went down, find out why. If it went up, confirm it's correct before spending the difference.

Keep Every Division Order

Division orders are part of your permanent records for each property. In MinRight, store the decimal interest and effective date for each division order, and attach a copy to the property record. When a new division order arrives, compare the decimal to what MinRight has on file. If it changed, find out why before signing.

For help verifying the math behind your decimal interest, see our posts on calculating decimal interest and understanding net mineral acres.