Clarification of "net royalty acres"

I have received a purchase offer for a non-participating overriding royalty interest that I was unaware of. The mineral deed describes 5 parcels totaling 1745 acres. These parcels are located in Fisher County TX. Research of the Railroad Commission site shows there is one horizontal well producing since January 2023 that goes thru 2 of the 5 parcels. The offer cites 1.60091202 net royalty acres.

Does the calculation of “net royalty acres” require that there is some production within the holdinjgs?

Where can I find the formula for calculating net royalty acres?

Am I correct that if additional wells are drilled in or thru the 1745 acres that the net royalty acres would increase and that selling my holdings now would preclude income from other wells?

You are going about this backwards. Your first action should be to immediately contact the oil company to get in pay on the new well, including any money in suspense. This may require that you take steps to perfect your title to the NPRI. This well is likely what triggered the purchase offer. Net royalty acres is a landman shorthand pricing calculation based on your royalty decimal in a producing well and an assumption that the royalty rate is 1/8. The calculation of your NPRI may vary depending on the exact wording in the original deed - for example is it a set fraction such a 1/32 royalty rate or is it a fraction based on the royalty rate in the current lease(s) such a 1/16 of the royalty so that it could be 1/16 of 3/16 or be 1/16 of 1/4? In the latter case, as the minerals are subdivided over the years, there may be multiple leases with varying royalty rates underlying your NPRI. Also, do you own 100% of the original NPRI grant or only a fraction of this grant? Do not consider selling until you understand exactly what you own. Then you and your oil and gas attorney need to carefully review the exact any purchase offer to make sure that you are being paid the full value.


Once you confirm your ownership, you may not want to sell. Check the RRC to see if there are any new permits nearby or on your acreage. Most offers to buy come before the drill bit, so wise to find out the pending activity and then make your decision. Buyers usually plan to make their profit on the pending wells.



You are probably right about me going about this backwards. If I knew that I had a substantial holding, following your advice would carry very little risk.

I have contacted the producer and am awaiting a response.

I have a certified copy of the mineral deed on its way to me. The deed grants 3.52% of the traditional 1/8 to a list of grantees with each grantee’s decimal interest listed and totaling 1.0. The person I inherited from had a .033 interest. ( I have rounded all numbers for simplicity). The total acreage is 1745 acres. If I understand the net royalty acre calculation it would be: .0352 (3.52%) X .125 (1/8 reserve) X .033 (relative int.) X .5 (1 of 2 equal inheritors) X 1745 acres = .0000726 X 1745 acres = .126687 net acres.

I have received an offer or $2801.60 for 1.6009 net acres with a provision that the numbers will be adjusted upon confirmation of net acres. It seems to me that the real offer is for about $221 based on my true net acreage and hiring someone to perfect my title might cost far more than any revenue I would ever receive.

So, my backward approach is to try to determine what my real holdings are, find out how much likely revenue has been produced so far and then determine whether I can afford to perfect my holdings.

Is my understanding of the net royalty acre calculation in error?

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First, recent Texas cases have interpreted NPRI language in different ways. It is possible that a reference to traditional 1/8 may end up being applied to royalty rate in the underlying leases and so be based on 1/4 or 20%, etc. It depends on the exact wording of the deed as a whole. Second, assuming that your numbers are accurate and that your NPRI is across all the acreage for the producing well (such as 640 acres for the well and your NPRI is in all 640 acres), then your royalty DOI is 0.0000726 in the well. For oil and gas sales of $1,000,000, your royalties are $72.46. If a well produces 1,000 bbl/day for the first month X 30 days X $70, sales are $2,100,000 for that one month and your royalty is $152.46. Third, I think that the proper calculation of royalty acres would require that your royalty decimal be divided by 0.125 (which is 1/8th). Fourth, an offer of $2,800 for 1.6 acres is $1,750 per royalty acre. That seems seriously low, but someone more familiar with Fisher County will have a better idea. Fifth, NEVER sell any minerals with the possibility of revised price. Finally, whose name is on the deed? If the deed is already in your name then your title will be clear. Otherwise, how many generations between you and the named owner on the deed? It may be very easy to clear up. Bottom line, you are indeed going about this backwards. Offers come along every day and this will not be your last and only option.

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