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  • Writer's pictureOil Patch Press

Division Order Analyst: Just What Do They Do, Exactly?

So, just what do division order analysts do? They are the company employee who determines who gets paid revenues from oil and gas wells in my area, when and how much. They also set up the records that allow the company they work for to bill partners their share of expenses when the company operates the well, or to receive and process the invoices for our share of expenses when another company operates and the analyst’s employer is just a partner. The analyst’s first priority is to properly manage and protect the company’s revenue and expense billing cashflow from these company assets. Of course, the Revenue Accounting department actually "books" the 100% revenues the analyst’s company receives from the purchaser when it sells its share of the oil or gas, but the company doesn't get to keep all of that money. It has to pay their "burdens" in those wells--the term division order analysts use to group royalty owners, overriding royalty owners, net profits owners and production payments owners together as their employer’s "accounts payable." The Revenue Accounting Department relies on me to set up the record to which they can book those 100% revenues for final distribution.

It’s not uncommon for a company’s division order analyst to create and maintain the joint interest billing records for all company-operated wells in the analyst’s assigned geographical area. This usually is a separate process apart from the revenue distribution process, meaning two separate records (each having a unique function) for distribution of gross revenue from a well to all entitled to receive some of it, and the joint interest billing record for billing partner’s to reimburse their share of last month’s operating expenses.

Most often there is a Division Order Title Opinion rendered by a contracted title attorney. The title attorney has reviewed all of the documents filed in the deed records and other records, such as probate and UCC records, to determine who owns: (1) the mineral rights, (2) oil & gas leases covering those mineral rights, and (3) who is entitled to receive a share of the production (applies to partners in the well) or payment of revenues (applies to "burdens" and those partners selling their production with my company as the operator). It’s not unusual for the title attorney to also analyze the contracts to which the land reviewed is subject. That opinion (DOTO, as division order analysts call it) must be fully analyzed before it can be used to create a division of interest record to which Accounting can book the 100% revenue checks from the purchasers every month.

The division division order analyst’s job involves numerous reports--incoming and outgoing. They must track their wells from spud (the day the drillbit "bites" the earth and starts drilling) until it is turned to sales (begins flowing into the tanks or pipeline). If the company the analyst works for operates the well, the analyst will create a "division of interest" setting out each name of those entitled to receive a proportionate share of sales revenues as of the first day of sales. After creating the owner account record (which assigns an owner number to the account), the analyst enters every name into the computer database using that owner number.

Most states have current laws requiring the first month of sales revenues to be distributed by a certain deadline, such as 120 days after date of first sales for example. If not distributed on time, without an approved reason for non-payment (such as a title problem with that owner) it’s not uncommon for the company to be liable to pay interest on the unpaid revenues.

Texas currently allows only 120 days to get the first payment into the hands of all of those owners who have signed and returned our division order which is compliant with Texas statutes. Other states allow six months, such as Oklahoma. Still others don’t have a specific deadline beyond “reasonable,” such as Louisiana.

For Texas wells, the division order analyst is allowed to suspend (withhold payment) to an owner until they sign and return the division order, as long as the division order contains only the terms allowed by the current Texas State statute. Oklahoma allows 180 days to get everyone paid, but in Oklahoma the owners must be paid regardless of whether or not they sign and return our division order. The same is true for the State of Louisiana, that a division order cannot be required before paying an owner unless a signed division order is what will cure a title opinion requirement (title defect) that would otherwise keep them from getting paid. Most owners are good about signing and returning signed division orders, though, regardless of the state.

Division orders are issued in states other than Texas really for the purpose of giving advanced notice to the owner that a new well is producing from their lease, and gives them the decimal they will be paid. If they disagree with that decimal, they need to contact the issuer. Getting a signed division order from an owner before the division order analyst authorizes Revenue Accounting to pay them can be important. If the analyst’s company pays the wrong person, the company might not be able to get the money back from the wrong person. And, regardless of whether it’s paid back, the company must pay the correct person. In other words, the company might have to pay the same amount of money twice because the correct owner still has to be paid.

Another important feature about Oklahoma is that royalties there must be paid by the operator to all owners in the pooled unit. Partners selling their share of production to their own purchaser (not through us as operator) must pay a percentage of their 100% revenues over to the operator each month, based on a complicated mathematical calculation the industry nicknamed "SB-168 royalties,” officially known as the Production Revenue Standards Act (PRSA). Likewise, Louisiana has unique laws regarding how an operator is to make certain royalty owners get paid, regardless of whether the operator owns an interest in the lease from which certain royalty owners must be paid.

Many companies process production revenues and joint interest billing invoices according to a calendar. It’s not uncommon that on the 3rd business day of each month operators will begin processing joint interest billing invoices to mail out to get reimbursed by all of the partners in all of the wells that they operate everywhere. Depending on the revenue accounting division of interest system used by an analyst’s employer, the analyst might not be allowed to perform in the database while JIB processing is being done and the invoices printed. Later on, after one to two weeks, the system will "cut off" data entry and not allow any more changes to any owner's account while revenue checks are being printed. A large number of payers issue production revenue payments on or around the 25th of each month. A division order analyst must carefully schedule their time each month.

Setting up a new DOI (division of interest) to begin paying everyone is not the end, it's just the beginning. Over time, owners sell their interest to others, transfer their interest into a trust, or pass away (with or without a will). Owners also move and must notify the payer of their new address, to update the company database. If an owner forgets and the payer loses contact with them, their revenue might end up being paid over by law to the state as unclaimed property. Also, Companies merge. Sell their ownership in leases. Trusts are dissolved. All of these events create work for a division order analyst--sometimes just a few minutes, sometimes several hours.

Every day, a division order analyst needs to hit the ground running to make sure all working interest (partners) ownership transfers and royalty owners transfers are completed in the database before current month “cut off”. This is called DOI maintenance. It creates a steady stream of Transfer Division Orders for the new owners from the transaction to be mailed, for the new owners to sign and return. Time marches on.

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