Question In a previous answer an expert stated that the royalty averages at about 20% up to 22.5%. My question is 20-22.5% of what? I am reviewing a contract and I cannot figure out what royalty interests are a percentage of. Thank you!
Answer The Royalty Interest is the royalty owner's fraction of the proceeds from selling the oil and gas. If the sale is $100 worth of oil and you own all of the royalty interest in the production unit, then a 20% Royalty Interest would receive 20% of $100. The operator and working interest owners would get to keep the other 80%.