CPL Division Orders & Revenue Distribution Flashcards
6 cards from real CPL practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CPL Division Orders & Revenue Distribution flashcards as text
When an interest owner dies and heirs wish to receive production revenues, what is the first step in updating the division order?
Answer: The purchaser suspends payments and requires heirs to provide probate documents or an affidavit of heirship
Upon notification of an owner's death, the purchaser suspends payments and requires heirs to submit probate documents—or an affidavit of heirship where permitted—before updating ownership records.
What is the primary function of a 'change of ownership' form in division order administration?
Answer: To notify the purchaser of a change in ownership so division order records and payments can be updated
A change of ownership form notifies the purchaser of a title transfer so they can update their division order records and redirect future revenue payments to the new owner.
What is 'joint interest billing' (JIB) and who receives it?
Answer: An invoice sent to non-operating working interest owners for their proportionate share of well operating costs
A joint interest billing is an invoice the operator sends to non-operating working interest co-owners for their proportionate share of well operating expenses under the joint operating agreement.
Most state statutes require purchasers to pay royalty owners interest on suspended funds if payment is not made within a certain period. What is the typical statutory trigger?
Answer: A specified number of days after production begins or a title issue resolves, commonly 60–120 days
Most state pay-when-paid statutes require purchasers to begin paying interest on suspended royalties within a defined period—typically 60 to 120 days—after production commences or after a title dispute is resolved.
What is the significance of the 'first purchaser' in the context of oil and gas revenue distribution?
Answer: The first purchaser buys production from the operator and is responsible for preparing division orders and making royalty payments
The first purchaser acquires production at the wellhead and, as the party actually distributing revenues, is typically responsible for preparing division orders and disbursing royalties to all interest owners.
In division order mathematics, if a lease covers 160 acres in a 640-acre unit and carries a 1/8 royalty, what is the royalty owner's decimal interest in the unit?
Answer: 0.031250
The royalty decimal interest = (160 ÷ 640) × (1/8) = 0.25 × 0.125 = 0.031250, reflecting the acreage proration and the royalty fraction.