Need Explanation - Difference in 3/16th and 1/5th royalty

Please help me understand (and explain to a non-profit Board of Directors) what the possible increase in royalty payment could be if we lease for the lower bonus, but the higher royalty. Does anyone have a formula they use to help people understand this?

3/16 is equal to 18.75%

1/5 is equal to 20.00%

The difference is monthly check would be an increase of 6 2/3%.

Tell the board that the money is in the ground.

As a negotiating suggestion, when landmen use techniques such as "buying down royalty" I have never had it fail to lease at the top bonus and top royalty when I push it. They are trying to give you a choice between something and something, rather than something and nothing.

I am well experienced with making presentations to the boards of non-profits. They have a short attention spans, so keep that in mind.


You are doing a great job of violating the boards terms of service concerning blatant advertising and solicitation.


Didn't mean to break any rules. We're new to the forums. Thanks for the info.



This is just one landman to another.

No harm, no foul as far as I am concerned. You have a great attitude, but the moderator will probably delete your posts. He has done so in the past.

Maybe we can do business one day. We are both working the same side of the street. What is your experience level and backround? Include that on your personal page. It's not on your website and folks want to know what they are getting.

I can suggest that you build your brand by offering well thought out advice. When people want to get a landman involved, they can easily see the ones that are helpful, erudite and think outside the box to offer solutions.

Your bonus will be your upfront opportunity cost that the non-profit will place on locking the property in until the drilling commences. Once the drilling commences and there is valid, substantive hydrocarbons (oil, natural gas, naturally formed gasoline, condensate, salt water -- anything commercially sellable that is valid to mine for under aforementioned lease), then the royalties are paid to the non-profit.

The royalty will ultimately be what you receive on a periodic basis, and is based solely on the percentage in which the non-profit is due per the terms of the contract (lease), and the quantity that is mined from the well. This can fluctuate, as you can tell, because the percentage that is agreed to, let's say in this case, 20% or 18.75%, is a fixed amount. If it's oil, and they are producing 100 barrels a day for a year, but after that, the flow is reduced to 50 barrels a day, then the royalty will be reduced as a result of the flow dropping.

My apologies for rambling, but that's it in a nutshell. obviously Buddy has enlightened us to the percentage factor here as well. Hope that helps. The key here is the differentiation between bonus and royalty. If you have any questions, feel free to ask more. We're here to help.

Brandon Sneed