# Royalty Payment Ratios

I am curious if anyone has ever seen some formula that would give a royalty projection figure. I am looking for something that would for instance tell me that for every barrel of oil pumped, my royalty would be for instance \$0.01. Even that seems to vary for some totally unknown reason. Perhaps there are so many variables such a formula would never work. Comments anyone?

Your division order actually has the information that you need.

I can give an OK example.
10 acres, 1/5th royalty, 50% of a two section well in a standard 640 spacing.

The equation is net acres/spacing acres x royalty x % completions in your section.

10/640 x .20 x .50=.0015625. For every barrel sold or mcf sold, that decimal is applied. On a royalty statement, the owner will document the gross volumes of product and the price for each month.
An example might be 10000 bbls oil for the month at \$80 gross to operator gives \$800,000 x .0015625= \$1250 to mineral owner. Same idea for gas. Howeverâ€¦ one must realize that wells decline rapidly and the high volume is not sustainable. Also prices change from day to day, so every month will be different.
Also, one will have taxes taken out, both state and federal and many leases have post production charges also taken out, so that must be accounted for.

Nobody has invented that crystal ball. A calculator will give you whatever answer you desire.

If you have a particular well or wells that are already in production or near production, a petroleum engineer can run a decline curve to predict the production of the well over its life. Pricing is always the unknown, but many use the NYMEX strip price corrected for your particular part of the country and access to pipelines.

That is most interesting M_Barnes, I was not aware such things existed. It this public information or must one hire a person to do each well? What would it cost per well?

You would have to contact the engineer for pricing. The Directories Tab above has several engineers that do this sort of evaluation.

Several of the subscription packages also have decline curve analysis in them, but one needs to understand how to use them.

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