How to read a Texas division order (and what to check before you sign)

A division order is the letter an operator or purchaser sends asking you to confirm your share of production before it starts paying you. It usually arrives after a new well is completed, after you inherit or buy an interest, or after the well changes hands. In Texas, what a division order can and cannot do is set by statute, so it is worth reading with the law next to it.

What Texas law says a division order may contain

Under Texas Natural Resources Code §91.402(c), a payor is entitled to a signed division order "containing only" these provisions (§91.402):

• the effective date;
• a description of the property and the type of production;
• your fractional or decimal interest, the type of interest, a certification of title, an agreement to give one month's notice of any change, and an agreement to refund payments if you do not have merchantable title;
• authorization to suspend payment while a title dispute is resolved;
• your name, address and taxpayer ID;
• provisions for the valuation and timing of payments; and
• a notice that other statutory rights may be available to you.

What a division order cannot do

The same section says a division order "does not amend any lease," and that any provision in conflict with your lease is invalid to the extent of the conflict (§91.402(c)(2) and (h)). Signing one also does not relieve the lessee of its duty to market production as a reasonably prudent operator.

If the form contains extra provisions beyond the list above and you will not sign it for that reason, the payor "shall not withhold payment solely because of such refusal" (§91.402(e)). If it contains only the permitted terms and you refuse to sign, the payor may hold your money without interest until you do. Either side can end a division order on 30 days' written notice (§91.402(g)).

How to check the decimal

The decimal is the number that sets every check, so it is the line to verify. For a simple lessor royalty it is usually:

your net mineral acres ÷ acres in the unit (or lease) × your royalty rate

For example, 10 net mineral acres in a 640-acre unit under a 1/5 (20%) royalty gives 10 ÷ 640 × 0.20 = 0.003125. Pull the acreage of the unit from the pooling declaration recorded in the county clerk's records or from the operator's letter, and your royalty rate from your lease. If the decimal on the division order differs from your own math, ask the operator's owner relations group to show its calculation before signing. Inherited interests, term royalties and multiple tracts make the arithmetic more involved, which is where a Texas oil and gas attorney earns the fee.

Check the property and the production

Make sure the lease or unit name and the county match what you own. Then look the lease up: start from its county page (for example Martin, Midland, Loving), search by name on Find my lease, or follow our RRC lookup steps. The lease page shows the operator and 36 months of production, so you can see whether the well is producing before your first check arrives.

When the first check should come

Texas law says proceeds must be paid within 120 days after the end of the month of first sale, then by the schedule in your lease. If the lease is silent, oil must be paid within 60 days after the end of the month it was sold and gas within 90 days (§91.402(a)). Late payments generally carry interest under §91.403, unless they were withheld for a title dispute or one of the other reasons the statute allows.

Before you sign

• Compare the decimal to your own calculation.
• Confirm the property description and county.
• Cross out or question language that changes how royalties are valued or deducted; that belongs in the lease, not the division order.
• Keep a copy, and note the RRC lease number for later checks with the royalty estimator.

Related: how to check a royalty check against RRC production and inherited mineral rights.

Not legal advice. Statute text quoted from Tex. Nat. Res. Code §91.402 as published by Public.Law.