Explain royalty payments of 18.5%

Texas based answer here, but I assume it is similar in Montana.

First, determine what type of well you are dealing with. Is it a tract well, pooled unit or a horizontal allocation well?

Each type of well has a similar but different formula. For purposes of this answer, I’ll assume it’s a pooled unit.

Pooled unit - we will assume the unit is 640 acres, you own an undivided 1/2 mineral interest under 80 acres and the entire 80 acre tract was included in the unit.

First step is to determine the tract factor, which is dividing the tract your interest is in by the size of the unit (80/640).

Then you multiple the tract factor by your mineral interest and lease royalty (80/640) x 1/2 x 19%.

This formula allows you to find your unit participation number. Once this number is found you can simply multiple it by the number of oil/gas produced by current market rates to come out with a rough estimate. Of course it’s impossible to accurately determine the operators deductions but it will get you in the ball park if your share.

Hope this helps!

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