James Whitaker owns the mineral rights to 340 acres in Coleman County, Texas. James
leases the property to Juniper Oil & Gas (Juniper) reserving a 1/8 royalty interest. Juniper drills a
successful well and begins producing oil. Before the first months production Juniper assigns a
5% ORI to its engineer, Marty Jacobs. In March 2020 Juniper incurred $17,500 of lease operating
expenses (production/lift costs), produced and sold 900 BBLs of oil at a price per BBL of $44;
the severance tax is 7.5%. Juniper assumes the responsibility of distributing revenue and paying
severance taxes. NOTE: When calculating owner decimal interest please go out six decimals.
REQUIRED (you must show your work):
a. Calculate the gross revenue to each party.
b. Calculate the portion of the tax each party pays.
c. What portion of the lease operating expenses does each party pay?