I am new to this forum and have a question. Our mineral rights have recently become part of a pool of around 3,300+ acres. Our particular tract consists of 478+ surface acres of which we have 15 net surface acres. The lease states that there are 4,567 Net Acre Feet calculated on the 478 acres. Earlier in the lease it shows the formula as to how the calculation was made for each tract contained in the 3,300+ acres. It appears to be a weighted average. The formula states 80% X Tract Productive Net Acre Feet and then 20% X Tract surface acres in Unit Area.
It then shows this particular tract as Tract Participation 0.1070633 Surface acres 478 with Net Acre Feet of 4,567.
I was a commercial appraiser for over 25 years and have appraised other mineral rights so I am arguably somewhat used to applying formulas and making calculations, however I have not done this before. Thus, I'm hoping someone can help me understand the correct way to make this calculation. Thanking you in advance!
In the below calculation I took the liberty of rounding up instead rounding down where I should have in some cases. Just trying to figure out if I'm even interpreting the information correctly and working the right formula.
1) Our 15 Surface Acres / Surface acres Tract 478(r) = 3.138 rounded to 3.5%.
2) Total Net Acre Feet this Tract 4,567(r) x 3.5% = 160(r) Net Acre Feet.
3) 160 Net Acre Feet converted to Barrels of Oil = 1,241,338(r).
4) 1,242,000 Barrels x $50 (current market price) = $62,100,000.
5) $62,100,00 x 1/8 (net lease amount. 0.125 or 12.5%) = $7,762,500.
Although that number looks good, for some reason my gut tells me I'm probably missing something here :-) I have a few other questions, but I'll hold on those until I first have an understanding of this part of the equation.
Thank you very much for taking the time to assist my learning here.