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About Laura M. FitzGerald, CPL
Expertise
I can answer all questions related to any oil and gas leases, mineral sales, pipeline right-of-ways, LA Dept of Conservation Units; negotiating with landmen for leasing your property, assisting in locating owners of suspended funds.

Experience
26 years in the field and owning my own land services company; being a royalty owner, and participating in drilling wells

Organizations
American Association for Professional Landmen, ArkLaTex Assoc. of Professional Landmen, and Dallas Association of Professional Landmen (DAPL), Women's Business Enterprise National Council (WBENC)

Education/Credentials
Certified Professional Landman, attended LSU, Notary Public

You are here: Experts > Industry > Oil/Gas > Oil/Gas > Royalties - North Dakota

Oil/Gas - Royalties - North Dakota

Expert: Laura M. FitzGerald, CPL - 11/1/2009

Question
Just trying to figure out how the royalties are going to be paid for my father and his five siblings.    North Dakota ...own mineral rights for 20 acres out of 160. signed lease for almost %19. Do u take 1/8 times %19 then multiply that times barrles produced? then divide by 6 (Father and 5 sibs)

EX:   .125 x.19 =.02375

      1000 barrels at 80 =80,000

      $80,000 x 30days =2,400,000

       $2,400,000x.02375=57,000 per month

       $57,000 divided by 6 (brothers and sisters)=$9,500 a month

       Am I way off or missing alot of info?... thanks

Answer
Below is how you would calculate the estimated royalty revenue, based on the information you have set out above. However, you have not stated whether the unit for the well is 160 acres, or the family owns 20 acres out of a 160-acre tract but the unit for the well is larger than 160 acres. Since I do not know what the exact unit size is, i will show you the calculation and you can plug in the appropriate numbers later.

Take the net acres owned, in your situation, 20 acres, and divide by the unit size. For our example here, I will use 160 acres.

20 divided by 160 = .125
Then, multiply .125 x your royalty of .1875 (You said that the lease was signed for "almost 19%", so I am assuming it was signed for a 3/16ths royalty, which is .1875) = 0.0234375 which is your Net Decimal Interest.

If the well produces 1000 bbls per day, multiply this by 30 days to get 30,000 bbls for the month.

30,000 times the oil price per barrel, for example purposes, we will use $80, like you have set out above: 30,000 x $80 = $2,400,000.00 (Total month's revenue).

- Take the total month's revenue for the well, and multiply it times your Net Decimal Interest = $2,400,000 x 0.0234375 = $56,250

However, if the unit size is not 160 acres, but is 640 acres, then it will reduce your Net Decimal Interest quite a bit.

Then, you are correct, in that, if the 20 acres is further diminished by being owned by 6 brothers and sisters, $56,250 divided by 6 = $9,375.

You did a good job!

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