# Allocation & Production-Sharing Wells

**Source:** Buckhead Energy Oil & Gas Encyclopedia (https://www.buckheadenergy.com/learn) — canonical: https://www.buckheadenergy.com/allocation-and-production-sharing-wells

Allocation wells and production-sharing agreement (PSA) wells are horizontal wells whose production is divided among several tracts the lateral crosses, allocating each tract's share — often by lateral length — rather than forming a traditional pooled unit.

## Why they exist
A modern horizontal lateral can run two miles and cross several separately-owned tracts. When the operator cannot or chooses not to form a traditional pooled unit across all of them, an allocation well (common in Texas) or a production-sharing agreement allocates production to each tract — usually in proportion to the lateral footage beneath it.
The result for you is a decimal interest derived from how much of the wellbore lies under your acreage, instead of a unit-wide share. The method is spelled out on your division order.

## Frequently asked questions

**How is my share calculated on an allocation well?**
Typically by the percentage of the productive lateral that lies beneath your tract (the "lateral-length" method), then applied to your mineral interest and royalty rate. The operator's allocation methodology should be disclosed.

**Are allocation wells the same as pooling?**
No. Pooling forms a defined unit and shares all unit production; allocation wells split a single wellbore's production across the tracts it crosses, without forming a conventional unit.

**Should I review an allocation-well division order carefully?**
Yes. The allocation method drives your decimal interest. If the numbers look off versus your acreage and the lateral path, it is worth professional review before signing.

## Related terms
- [Force pooling explained](https://www.buckheadenergy.com/force-pooling-explained)
- [Division orders explained](https://www.buckheadenergy.com/division-orders-explained)
- [How operators decide where to drill](https://www.buckheadenergy.com/resources/how-operators-decide-where-to-drill-next)

_Educational information only, not legal or tax advice. Buckhead Energy is a direct buyer of oil & gas mineral and royalty interests._