LDO System Overview

The system uses two types of interest groups: Working and Royalty. You set up Royalty Interest (RI) groups and attach them to the Working Interest (WI) groups burdened by their interest. Both Working and Royalty groups can contain override interests depending on whether the override is based on a tract portion or on an associated WI owner's portion. Then LDO ties the Working Interest group and associated royalty owners to a tract master and one of three royalty calculation methods selected for the burdens.

• Method "W" keeps royalties associated with their working interest owner.

• Method "C" communitizes the royalties; i.e., all royalties burden all WI owners.

• Method "P", for Oklahoma only, calculates the PPI, proportionate production interest, and communitizes royalties based on each Working Interest owner's PPI.

The entitlement contribution in the tract is based on the contributed net acres to the total gross acres. Tract Assignments accumulate all the entitlement interest contributions until the total net acres contributed equals the total tract acres assigned. The Land Division Orders System automatically proportionately reduces these interests when entered. Once the tract total interest and acreage is 100%, the analyst can process the Tract Assignment item. At this point, the analyst creates Exhibit 'A' attachments to mail with Division Orders for signatures. Other detail reports showing well, tract, WI owner, and associated burdens are available for processing and review. Calculation and printing of Oklahoma Proportionate Production Interest (or PPI) for mailings are also available in two formats. The system is ready to create legal DOI's for use in the Revenue System or Split Stream WI groups at this point.

Product codes, type interest codes, and pay codes used in the Land Division Orders System are the same as those you set up in Revenue. Prior to setting up a Division of Interest (DOI) for a property, the analyst must break out the ownership between different products, if appropriate. Then the analyst should break the DOI into individual groups that represent the logical relationships between Working Interest owners and any Royalty Interest or overrides that burden those working interest owners.

Once you enter all groups, the Working Interest percentage total (displayed on the Group screen) is 100%.