Let P&P do the number crunching for you!
The Division Order component is essential for all E&P Companies. P&P Land Services distinguishes itself from other Land Outsourcing companies by offering a comprehensive Division of Interest Department with a wide range of services.
A Division Order (“DO’s”), also known as a Division of Interest (DOI), is the instrument which details the proportional ownership of produced minerals, including oil, liquids, natural gas, etc., in a well or unitized area of production. In essence, the DO is the document laying out everyone’s piece of the production “pie”.
Why are DO’s so complicated?
But DO work is so much more than just sending and receiving that one signed document. As a full-service Division Order department, sending out Division Orders is only one of the mission-critical DO services P&P Oil and Gas Services provides.
First, a Division of Interest (DOI) deck must be set up. Like a deck of cards, the DOI deck reflects the entire 100% interest in the property. Sometimes DOI decks are received from landmen or from accounting personnel. More often though, P&P will generate the DOI decks by using lease, tract, and well data (such as lease working interest, lease royalty rate, or tract mineral interest to name a few) previously set-up in the client databases we also manage.
Second, to ensure accurate Division Orders, these DOI decks are then cross-referenced to Title Opinions, Unit Designations, and other information. This verification process ensures that landowners receive their proper share of production. Division orders truly give life to the term, “show me the money!”
Third, the foundation of a proper Division Order is the Interest Calculation. The calculation can be quite complex. Producers will follow the final calculation to make payments in the correct amount and to the right people.
A key participant of the Division Order process is the Division Order Analyst. Often times, during this stage, a Division Order Analyst will begin to encounter transfers of interest that have already occurred. Such as when a mineral owner has passed away and their estate has been probated.
Fourth, these discoveries must result in updates to the DOI deck, land administration database, and lease files. Updating the DOI deck is a vital function. As ownership is updated, addresses are corrected, and the DOI deck verification process is completed. P&P ensures customers are kept abreast of the status through a reporting and approval process.
Fifth, Accounting records are then updated, either by P&P, the operator’s in-house Accounting department, or another third-party accounting firm. Unlike most lease data and contact information, Division Order information is required and used by personnel outside of the Land department.
Sixth, all of the previous steps lead up to the critical Division Order document or report. The Division Order will contain a Unit Description, Well Name, the Net Revenue Interest (NRI) which was previously calculated to be received by each individual owner, and any other required fields per state regulations. The purpose of the Division Order is to give notice. Not just to the owner, but the other governmental agencies, such as appraisal districts and regulatory commissions.
Seventh, once a DOI deck is established with confidence, Division Order packets to each owner can then be mailed out. A DO Packet will typically consist of: a Division Order, a cover letter, which may include a request for supporting documents when needed (title curative), and sometimes a GIS map or plat of the land produced. The packet is sent on behalf of the producing party to all interest holders, primarily working interest partners and landowners with a royalty interest in production.
Eighth, the person or company receiving the Division Order can then verify their NRI. This process will typically consist of keeping one copy of the Division Order for personal recordkeeping and then returning a signed copy of the Division Order to P&P or the operating company. Sending and receiving of the Division Order is tracked by P&P.
Ninth, at this point, the Owner Relations functions begin to play a larger role. DOI decks are updated as executed Division Orders are received. Each State can have different statutes regarding Division Order requirements and how they are handled. Based on these rules, an owner’s “Pay Status” on a DOI deck can be affected and must be meticulously tracked and maintained. Staying current with these varying and changing regulations is another benefit P&P provides its customers to offer peace of mind.
Finally, after Division Orders have been received, and the DOI deck has been updated to begin payments, Accounting can begin cutting checks! At this point the focus shifts from Division Order preparation to Division Order maintenance. During the DOI maintenance period, the Division Order Analyst will perform transfers of interest in the event of death, divorce, sale, or some other type of conveyance; possibly in tandem with other Lease Maintenance duties. The Analyst will also update existing records when parties move or other correspondence dictates necessary changes. All these transactions are reported to, and approved by, the producing company. P&P is able to handle the entire process as an outsource Division Order department, or a la carte if desired.
If you are in need of Division Orders services, call us! We would be happy to show you how we can help meet all of your Division Order needs!