What is a Division Order?

A division order states the exact proportional ownership of the oil and gas produced by a property. This document identifies the property, the various owners and their unique owner numbers, the type of interest, their respective percentage interests in it, and the terms of purchase. Each owner must sign the document, attesting that their stated ownership interest is correct. A division order is used by either the lease operator or the purchaser of the output from the lease to make payments to the interest owners. It is also used to protect the lease operator from liability, since the royalty owner is indemnifying the operator against liability to third parties claiming to own the interest currently being paid to the royalty owner.

In cases where the owner of an interest has not been identified, any revenue associated with that party is held in a suspense account. Similarly, if there is a dispute about ownership or the division order has not been fully executed, the operator can hold all revenue from the property in suspense.