Royalty Ownership Questions and Answers

What are Royalties?
Royalties are the mineral owner’s share of production as reserved in an oil and gas lease, free of production expense.

What is Clearing the Title?
If petroleum can be produced in commercial quantities, royalty owners must clear the title to mineral rights for oil and natural gas extracted from the property. This process involves several parties and typically takes several months.

What is an Oil and Gas Lease?
A written agreement in which a property owner (lessor) allows another person or company (lessee) to exploit any oil or gas deposits on the land for a certain period of time in exchange for periodic payments. Lists amount to be paid, payment period, and other rights and obligations of the lessee and lessor. Signing of the lease permits the drilling and production of oil and/or natural gas on the leased property for a specified period of time.

What is a Division Order?
A Division Order is a directive signed by the royalty owner verifying the purchaser or operator of a well the decimal interest of production owned by the royalty owner. Also, it provides the owner’s address and tax identification number or social security number, among other items. After the title is cleared, A Division Order is sent to all participating parties. The Division Order includes the decimal interest, a legal description of the property, the operator’s name, and several legal agreements associated with the process. When this step is completed, you can be put into a “pay status” to begin receiving revenue payments.

What are some of the more common interest types shown on the remittance advice and what do they mean?

WI or WKI–Working Interest:
The right granted to the lessee of a property to explore for and to produce and own oil, gas, or other minerals. The working interest owners bear the exploration, development and operating costs.

ROI–Royalty Interest:
The share of the production or proceeds owned by the lessor under the terms of the mineral lease.

ORI–Overriding Royalty Interest:
An interest in production that is created and payable out of the working interest. Usually, the term of an ORI is for the life of the mineral lease.

BR–Blanchard Royalty Interest:
An interest that is specific to royalty owners in Oklahoma. See Oklahoma Senate Bill 168 for more details.

PR–Pooled Royalty Interest:
An interest where the WI is paying the Operator of Record the “pooled royalty” to be distributed by the operator of record to the royalty owners covered under Oklahoma Senate Bill 168