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About Frederick M. Scott CMM RPL
Expertise
I can answer questions about oil and gas leasing, and give suggestions on negotiating a good oil and gas lease and how to best deal with oil companies or their representatives. I can answer questions about buying and selling oil and gas royalty or mineral rights. I can help with questions concerning forced-pooling, correlative rights, deeds and conveyances, and "post-production" costs. I am most experienced with Oklahoma properties and laws, but am able to answer questions concerning other oil and gas producing states in many cases.

Experience
I am a Certified Professional Mineral Manager (CMM) (certified by the National Association of Royalty Owners in Tulsa, OK) and have managed my own oil and gas properties in Oklahoma for over 10 years. I have dealt with many landmen, attorneys, and other oil and gas professionals in the course of doing so. I am also a member of several professional associations and have written articles of interest to royalty owners which have appeared in several industry publications. I have prepared deeds, title work, and done curative for my own minerals; and have acquired a good deal of knowledge on the subject of oil and gas law and landwork in general in the process. I am the owner of Timbercreek Mineral Company, LLC; which was formed as a vehicle to manage family mineral interests, and as a way to facilitate the buying and selling of oil and gas interests for other people.

Organizations
NARO, NADOA, AAPL

Publications
National Association of Royalty Owners "Action Report" (ROAR); NADOA Magazine, Landman Magazine, and several royalty owner association groups newsletters.

Education/Credentials
NARO, NADOA, AAPL

You are here: Experts > Industry > Oil/Gas > Oil/Gas > calculating gas royaly income

Oil/Gas - calculating gas royaly income

Expert: Frederick M. Scott CMM RPL - 10/31/2009

Question
Total unit is 187.66 acres and my portion is 91 acres production of first month was 34,217 mcf and my royalty is 3/16 and gas is $5.00 what would projected gross income be? Thank you

Answer
Short answer: Your gross check for first month's production would be about $15,555.49. The longer answer is below, and I have posted it before on this forum (hence the 2007 gas price example):

An easy way to estimate your potential royalty in a hypothetical (or actual) well is to use what's called your "decimal interest." It's a good thing to know, because your decimal interest is also used by the company to figure your royalty.

To figure your decimal interest, take the number of acres you own in the unit (40, for example) and divide it by the number of acres in the unit (640, for example.) Continue on and multiply by the royalty on your lease (usually 3/16 or 1/8.) In this case we'll use 3/16, which is .1875 in decimal form. .0625 X .1875 is approximately .0117. This will be your "decimal interest."

The decimal interest represents your "royalty interest" in the unit, proportionate to your ownership in the whole 640-acre unit. Had you owned the 200 acres rather than only 40, your decimal interest would have been figured thusly:

200 divided by 640 times .1875 = .0586 (about)

As you can see, you can plug any number you like into this formula. Once you have your decimal interest, take the amount of money that the well makes in a month and multiply it by your decimal interest. The result would be about what you could expect in royalty that month.

A decent gas well might produce 30,000 MCF of gas per month. "MCF" is an acronym for "thousand-cubic-feet" so 30,000 MCF is really shorthand for 30-million cubic feet of gas.

Natural gas sells for about $6 per MCF these days (2007) in Oklahoma. If a well produces 30,000 MCF in a month that would mean there was $180,000 in sales from the well that month. Multiply that figure by your decimal interest to arrive at your approximate royalty for the month. In our example, your 40 acres of minerals owned in a 640-acre unit at 3/16 royalty would come out to about $2,109.37 for that month.

Hope this helps you figure your royalties.

Alternatively, if you don’t know how many acres you own, or want to confirm it, you can use the decimal interest shown on your check stubs (sometimes called “owner decimal”; “payment decimal” or similar.) Take the decimal interest shown on your run sheet, multiply it by the unit size if known (i.e. 640 acres) then divide by the royalty amount. The result is the net acres you own in the unit.

If you don’t know the unit size or royalty, you’ll need to contact the operator or perhaps the lessee. A copy of the lease (showing the royalty and perhaps the unit size) will be filed in the county courthouse in the county where the minerals are located. Your operator would also know the unit size.

Hope this helps you out.
Frederick M. "Mick" Scott CMM RPL
Timbercreek Mineral Company, LLC

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