# Revenue calculation from a small mineral interest

Hi All, I own a small mineral intrest in section 271 block 13 in Reeves County . 3/4of an acre. Recently receved this to explain roughly what I could get if there was a producing well. (Assuming they form a 1 section unit-10 net acres X 20% royalty /640 acre unit size=.003125 royalty intrestin the unit. Assuming the unit(640 acre section) makes 500,000 barrels@ \$50 oil=\$25,000,000 total production X .003125 royalty intrest for 10 acres= \$78,1125 value for the 10 net acres (\$7,800 per net acre) Does this sound right? So my question is over the lifetime of the well I would only make around\$7,800? I know this does not include gas. Anyone else have experance with this, Im totally confused. And have been getting offers to sell.Upwards \$20k plus Any help would be greatly appreciated. Thank You

I have a few acres in the same section. I wish I could help , but like you Iâ€™m a little confused how it works out.

A few things should be considered. Some (but not all) are:

1. Royalty rates these days are typically 25% (unless you are locked into an old lease).

2. You will need to subtract 4.6% severance tax for oil production.

3. Donâ€™t assume just 1 well. There could be 4 or more in that productive zone and more in other formations. (this could be the biggest factor in valuation)

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MA Smith is correct. Royalties are normally 25%, and owners hope operators drill multiple wellbores under a 640 acre pooled unit. Yes, you deduct severance taxes (4.6% of your oil royalty), but you will make additional royalties from NGLs and dry gas â€¦ NGLs add 10%-12% in addition to oil on some wells. Hopefully, your lease does not make you share the operatorâ€™s post production costs.

Not sure if you own 3/4 acre or 10 acres? â€śNet Mineral Acresâ€ť. Royalty decimal = (your NMA / 640 acres pooled unit) x royalty %. Multiply your decimal x production.

If you own 3/4 NMA, (.75/640) x .20 x \$25,000,000 well life production = \$5,859 before severance.

If you own 10 NMAs, (10/640) x .20 X \$25,000,000 = \$78,125 before severance.

Hi All, Thank you so much for helping me with this. The math above was provided by my cousin as an example. My actual lease says" 10.00 acres of land,more or less, being lots 1&2 block1 of the Toyah valley grape co. Section 271 block 13 h&gn survey. On the lease extinsion it says I own an undivided 0.75 net mineral acre intrest and will be recieving 25% royality. I hope this helps. Again â€śThank you so much for your helpâ€ť!