More often than not, a single well or lease will have multiple owners. A Division Order is created as soon as the title has been confirmed, the well has been drilled, and production has begun. A Division Order is a written document that directs the distribution of proceeds from the sale of crude oil, natural gas, and/or natural gas liquids (“NGL”‘s). Among other things, the Division Order describes the specific property involved with its legal description (usually Section, Township, and Range); it specifies the royalty or working interest of individual owners, their most current address, and the request of their signature with social security number (“SSN”) or tax-payer identification number (“TIN”). Until the Division Order is signed, any funds will be placed in suspense. Occasionally the Division Order is referred to as a division of interest.
On the Division Order, there is a line for the owner to include their TIN or SSN. PDC needs this information to report to the IRS. If an owner does not wish to provide their TIN/SSN, there will be a withholding deduction of 24% as provided under IRS regulations.
Royalty owners can update their address directly on the Division Order by hand writing their new address and initialing next to the changes. PDC then mails two duplicate copies of the Division Order; one to be signed and returned to PDC and one copy for the owner to retain for their own records.