The Revenue DOI, Horizontal Wells, and Unleased Mineral Owners in Texas By: Marsha Breazeale
well and is common in Texas.
The combination of database data entry requirements for horizontal wells containing unleased mineral owners presents a unique challenge for division order analysts when working Texas properties as opposed to properties in other oil and gas producing states. Other states almost always have easily available involuntary (forced) pooling available to operators, Texas does not. Don’t get me wrong, Texas does have forced pooling statutes but they are expensive and cumbersome to use. We will take a look at the three main areas that give division order analysts a challenge when a new-drill horizontal producing area contains unleased mineral owners. They are (1) the basic types of horizontal wells that are drilled, (2) the special considerations for unleased mineral interest owners (UMI owners) when a horizontal well is drilled, and (3) the special care analysts must take with some of the popular revenue distribution software systems when entering data for this type of well.
The third kind of horizontal well is the pooled, or unitized, horizontal well. Several individual tracts are pooled together to form a unitized area for production. This is a unitized horizontal well.
Unleased Mineral Interest Owners
UMIs in a one-tract horizontal well would be paid their proportionate, unleased interest (after 100% payout if they do not participate). There is no contract involved, so it doesn’t matter that they are not bound by it. Revenue distribution to a UMI in this type of horizontal well really is straight- forward. UMIs in an allocation horizontal well are a bit more complicated. Revenue distribution among all shareholders (owners) in an allocation well can be calculated based on any one of four scenarios in Texas. First, the distance between the first take point and the last take point is measured by a licensed surveyor. Then the surveyor measures each length of the lateral contained in each of the tracts involved, sometimes also stating the length in feet and assigning the percentage of the total wellbore length contained in each tract in each a separate legend or a call-out box in the as-drilled well plat. The revenue decimals for the owners in each tract then are proportionately reduced by the percentage of length of producing wellbore in that tract, by the division order analyst. The second acceptable method of allocating production between non-pooled tracts is much like the first, except it breaks apart the production lengths based on total length between point of entry into the producing zone (called the penetration point) and the end of the wellbore
Types of Horizontal Wells
There are three types of horizontal wells in Texas. The first is the one-tract horizontal well where the only tract involved is large enough that no pooling is needed. The first and last take points in the lateral are both inside the boundaries of the one tract. Rare, indeed, but it does happen. We’ll call this the one-tract horizontal. The next kind of horizontal well is the one that involves more than one tract but is not pooled. The first take point is in one leased tract and the last take point is in another tract. The horizontal wellbore lateral can begin in one tract, cross over into another tract, and even a third or fourth tract in some cases, before reaching the last take point. This type of well is called an allocation horizontal
G rowth T hrough E ducat i on - O c tober / N ov ember / D e c ember 2025 15
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