My question is regarding the royalties on the oil wells (two) drilled on part of our family’s mineral rights acreage owned. Why are my mineral royalties (1/7 of the total amount) on oil based on acres in the unit being drilled (.00220842 instead of 18.75% divided by 7)? That is a HUGE difference in the amount of royalties being received! I understood that we as a family would get 18.75% of the amount produced (less any production costs), and my portion would be 1/7 of that is I own 1/7 of the total mineral rights. Am I wrong?
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How many cares do you own? How large is the pool for the wells? Many modern wells include 1280 or even 1900 acres in the well. Divide your acreage into the pool size, and then do your math.
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You need to determine the number of net mineral acres (NMA) owned. The lease with describe gross acreage in which your family jointly owns some fractional interest. Your royalty rate only applies to the NMA which you own, not to the total acres in the unit. For example, supposing the lease references the 640 gross acres in the section, but your family only owns 1/6th of the minerals, which would be 640 X 1/6 = 106.67 NMA. This would be due to the mineral ownership having been subdivided over the years. If the unit is 1280 acres, then the family DOI in the well would be 106.67 / 1280 X 0.1875 = 0.018750. Your 1/7 would be 0.0187500 / 7 = 0.00267900.
I own 22 acres and the unit is a strange size…1912 acres. We did the 22.52 divided by 1912 X .1875 and that equalled .00220842
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