I have 15% NPRoyaltyInterest in oil well being drilled at present. Signed pooling agreement for total of 525 acres in pool. My acreage contributed is 104ac. Oil company attorney says that my NPRI interest amounts to revenue of 15barrels per 100 barrels produced. Is that correct and if not what is the correct formula used to compute revenue. Thanks for any help.
Jim:
That formula doesn't sound right.
Based on your description of the scenario and some logical assumptions, I'd think it would more likely look like the following:
15% x (The applicable lease royalty) x 104/525 = ?
If the applicable lease covers 100% mineral interest in the 104 acres and the royalty is say, 20%, then the formula would look like:
15% x 20% x 104/525, or 0.00594285714 or 0.594285714%
If the operator has voluntarily credited you with an additional 14.4% revenue interest, good for you! Bad news is, the operator won't be in business too long if they have a negative net revenue interest!
More often than not, NPRIs are a percentage of the royalty, not a percentage of gross production. Your situation may be different, of course.
Did you ratify the lease from which your NPRI was created? If so, what was the royalty on the lease?
Mr. Vincent beat me to it.
Tract Size (net) / Unit Size = Tract Participation Factor
Tract Participation Factor X Royalty = Share of production
There are a lot of things that need further explanation, such as is your NPRI a fraction of royalty or a fractional royalty.
If they credit you with the full 15%, sign the Division Order, place in the DO that you will not warrant title nor be liable for over payments.
Buddy Cotten
Thanks Buddy - I did not think first scenario was correct. Jim
Jeff Vincent said:
Jim:
That formula doesn't sound right.
Based on your description of the scenario and some logical assumptions, I'd think it would more likely look like the following:
15% x (The applicable lease royalty) x 104/525 = ?
If the applicable lease covers 100% mineral interest in the 104 acres and the royalty is say, 20%, then the formula would look like:
15% x 20% x 104/525, or 0.00594285714 or 0.594285714%
If the operator has voluntarily credited you with an additional 14.4% revenue interest, good for you! Bad news is, the operator won't be in business too long if they have a negative net revenue interest!
More often than not, NPRIs are a percentage of the royalty, not a percentage of gross production. Your situation may be different, of course.
Thanks for the reply. I have 15% of Royalty. Other 5% goes to others. I retained 1/8 NPRI when I sold 104ac tract in 1978. Revisionary clause gives me another 2.5% so total of 15% of Royalty Interest- Non-Participating.
Buddy Cotten said:
Tract Size (net) / Unit Size = Tract Participation Factor
Tract Participation Factor X Royalty = Share of production
There are a lot of things that need further explanation, such as is your NPRI a fraction of royalty or a fractional royalty.
If they credit you with the full 15%, sign the Division Order, place in the DO that you will not warrant title nor be liable for over payments.
Buddy Cotten
Mineral Manager
Buddy - Based on last reply to you can you come up with my percentage of revenue or production. For example-600bperdayx30daysx$93.00per barrel x my percentage= ?
jim henderson said:
Thanks Buddy - I did not think first scenario was correct. Jim
Jeff Vincent said:Jim:
That formula doesn't sound right.
Based on your description of the scenario and some logical assumptions, I'd think it would more likely look like the following:
15% x (The applicable lease royalty) x 104/525 = ?
If the applicable lease covers 100% mineral interest in the 104 acres and the royalty is say, 20%, then the formula would look like:
15% x 20% x 104/525, or 0.00594285714 or 0.594285714%
If the operator has voluntarily credited you with an additional 14.4% revenue interest, good for you! Bad news is, the operator won't be in business too long if they have a negative net revenue interest!
More often than not, NPRIs are a percentage of the royalty, not a percentage of gross production. Your situation may be different, of course.
Dear Jim,
Making the assumption that you have a full 15% NPRI in the 104 acre tract, your revenue decimal in the unit well would be
.15 x 104/572 = 0.02713043
600 BOPD x 30 x 93 = $1,674,000 x .02713943 = $45,416.34 (your monthly share based on your assumptions)
Congrats!
And if they drill 2 more densifying wells in the unit, you can do the math on that.
Buddy Cotten
Thanks again for the reply Buddy - I used the formula you sent me using 525ac. Pooled/ divided by 104ac and so forth. My initial confusion resulted in a reply by oil company landman. I most probably misunderstood him.
Buddy Cotten said:
Dear Jim,
Making the assumption that you have a full 15% NPRI in the 104 acre tract, your revenue decimal in the unit well would be
.15 x 104/572 = 0.02713043
600 BOPD x 30 x 93 = $1,674,000 x .02713943 = $45,416.34 (your monthly share based on your assumptions)
Congrats!
And if they drill 2 more densifying wells in the unit, you can do the math on that.
Buddy Cotten
Mineral Manager
Thank you for reply. I talked to land man (attorney) with company drilling well. He said I had a "Golden NPRI". His term - not mine. I reserved 1/8 NPRI(12.5%) when I sold 104ac.in 1978. However the company attorney said I was entitled to additional two and one-half percent due to revisionary clause (20yr. right that expired in 1998) and reverted to my benefit. Don't know term "densifying well" ?
Jeff Vincent said:
Jim:
That formula doesn't sound right.
Based on your description of the scenario and some logical assumptions, I'd think it would more likely look like the following:
15% x (The applicable lease royalty) x 104/525 = ?
If the applicable lease covers 100% mineral interest in the 104 acres and the royalty is say, 20%, then the formula would look like:
15% x 20% x 104/525, or 0.00594285714 or 0.594285714%
If the operator has voluntarily credited you with an additional 14.4% revenue interest, good for you! Bad news is, the operator won't be in business too long if they have a negative net revenue interest!
More often than not, NPRIs are a percentage of the royalty, not a percentage of gross production. Your situation may be different, of course.
Jim, when an oil company person says "golden" I would immediatly think "bronze". People seem to be easier to deal with when they think they are getting much more than they actually are.
Densifying wells would be additional wells drilled in the unit. Additional wells may take a couple of decades to be drilled or the operator could drill 10 without moving the rig, depends on how good the first well appears and whether the operator wants to produce or keep the reserves in the ground.