America’s conversation place for mineral owners
Net royalty acres is how 99% of buyers value minerals since lease royalty rates can vary. At 3/16, 2.5 NMA is equal to 3.75 NRA.
Dear Ms. Willis,
The way that I was taught to determine royalty acres, was that there were 8 royalty acres per mineral acre. Therefore the total royalty acres under your 2.5 mineral acres would be 20 royalty acres. You own 3/16 of the royalty under those 20 royalty acres, so your net royalty acres would be 3.75 net royalty acres (20 x 3/16).
So would 25 min acres at .25% equal 100 net royalty acres?
It would be 50 net royalty acres. The formula is:
Net mineral acres * 8 * royalty = net royalty acres
25 NMA * 8 * .25 = 50 NRA
Thank you, It's been a long time since I did any real math I got an offer once for net mineral acres. I did not sell. I find it foolish to sell minerals in the first place. I thought the person was pulling my leg. He probably thought I was a dunce too! lol
Before anybody shoots at us, your equation is almost correct. The correct equation is:
Net Royalty acres = Net mineral acres x 8 x (royalty-Non Participating Royalty Interest).
A Non Participating Royalty Interest in this case is hereby defined to be any burden to the royalty interest.
Thank you very much. I see your responses in this forum a lot and you always explain things clearly.
I suggest defining your sale in net mineral acres and then agreeing on a formula to reduce the per acre price to take into account royalty burdens like NPRIs. In my view, an NPRI burden should not reduce the sales price dollar for dollar, because the ability to receive bonuses and the executive rights are worth something.
I have bought and sold lots of mineral and royalty interests and have never used a royalty acre as a basis for computation of consideration. Perhaps others have, but not me. For the most part, in my area of activity, a royalty acre is almost an term in antiquity.
Good Point, Wade.
I'm so glad to hear you say that, Buddy. For us lay people, things are confusing enough without complicating them with mathematical computations that keep us still scratching our heads!!
The royalty acre is the standard unit of measurement in mineral and royalty business, and it will always be used by many mineral brokers (especially landmen) to quantify how much revenue interest is being purchased, which is how offers are ultimately determined. There is nothing wrong with using this method internally to determine an offer amount. However, bringing up the subject of royalty acres with the actual mineral owners is only going to lead to confusion or misunderstandings, in my experience. Mineral owners should negotiate in terms of net mineral acres, and the contract should reflect those terms.
This is a fine and accurate point Wade makes just above in my opinion.