Oil/Gas/Royalties - North Dakota
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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
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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Answers by Expert:
Laura M. FitzGerald, CPL
Expertise
PLEASE READ CAREFULLY BEFORE SUBMITTING A QUESTION. I can answer all questions related to oil and gas ownership, mineral interests and working interests concerning the leasing and selling of your minerals, any questions concerning pipeline ROW's, units with the Louisiana Department of Conservation; pooling provisions, depth limitations, vertical or horizontal pugh clauses; and oil and gas terminology. I can offer assistance in negotiating for leasing your property, assisting in locating owners of suspended funds. I am only able to answer questions regarding oil and gas leases, minerals, royalties, or offers to purchase mineral/royalty interests if I have complete information. Please provide a full legal description for your interest(s). If the question pertains to a lease, please include all terms of any current (or desired) lease offers, including lease bonus amount, royalty and lease term. If the question is regarding a mineral or royalty interest offer to purchase, please provide the offer amount, date of offer, other offer terms, and further details on the mineral/royalty interest, such as lease terms, and if producing, the average monthly income. Since I receive numerous inquiries daily, I am only able to answer your questions efficiently and effectively if I have complete information. I must decline any questions submitted with incomplete information. If your question is non-technical in nature and you simply need assistance understanding an oil and gas matter, please submit your question with as much information and detail as possible. Any background information that has led to your question is also very helpful.
Experience
I have over 26 years experience as an Independent Petroleum Landman. I became a Landman after working as a paralegal for Oil & Gas Attorneys for 8 years. My first 2 years were spent specializing in Well History and Research with the Louisiana Department of Conservation, then moving into clearing title defects and handling title curative for oil and gas properties for the next 6 years. Subsequent thereto, I handled title issues, buying oil and gas leases and settling surface damages. I also acquired acreage for drilling prospects in excess of 10,000 acres. I also became a mineral/royalty owner commencing in 2004 and have found that I can help many people when they have reached the point in their lives they feel converting their minerals or royalties into a cash asset benefits them.
Organizations
American Association for Professional Landmen, ArkLaTex Assoc. of Professional Landmen, and Dallas Association of Professional Landmen (DAPL), Certified by the Women's Business Enterprise National Council (WBENC)- South. This certification is one of the most widely recognized and respected certifications in the nation. This designation is reserved for only those women-led businesses that exemplify the characteristics of integrity and professionalism to which the WBENC adheres to so strictly.
Education/Credentials
Attended LSU, became a Certified Professional Landman in 1994; Notary Public with dual authority in multiple parishes in North Louisiana;
Bilingual in English and Greek
Awards and Honors
Expert Oil & Gas Professional assisting attorneys representing landowners.
Involved in 2 lawsuits and both suits were awarded to the landowner.
Past/Present Clients
Consultant Landman for Texas Oil & Gas (TXO Production Corp.), Anadarko Petroleum, Comstock Resources,Independent Geologists, Pipeline ROW Clients, and Oil & Gas Attorneys. For the past 2 years my practice is limited to advocacy for the landowner. I also assist royalty owners recover suspended payments or incorrect royalty payments.
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