Im trying to clarify something my mother keeps asking me as I do not know all about royalty and payouts. She is stating something about the Tx railroad commission and something about getting 17% of the oil up with receiving 25% royalty wich she would get 1/4 of that amount. So I am trying to do the math for her to give a realistic dollar amount per month or year for profits after production starts. This is the formula I came up with which seems simple but may not be complete or totally correct. if the well is bringing up 200 barrles a day and say the price of oil is 100 dollars a barrel, that would be $20000 a day as an estimate, not including taxes and production cost/shipping. so lets just say 20K so her part would be 1/4 of 25% of 20K ?? is that right. so is would be like 37,500 a month? Anyone understand that or know what is to be true? Any help would be appreciated.
Hi Medic,
More information is needed before someone can answer your question. Is the well exclusively on your mother's property and not part of a pooled unit? Does she own all of the minerals? If a pooled unit, how large is the unit and how many acres does your mother have allocated to the unit? Does her oil and gas lease say that she will pay her proportionate share of production costs or that they can't be deducted from her share? Once you provide this information, a better estimate can be made.
well she owns an undivided interest. 4 families to split 25% of royalty I believe my uncle has in contract that they do not pay for production or transport of oil. She owns the mineral rights to her share, and this is just one layer of the share. So what she is telling me is that (using rounded numbers) $10K profit or oil profit split by four families then take 1/4 of that amount (1/4 of 1/4 of 25%) and that is her daily pay. now I understand that but I hear this, “bringing up anywhere from 3% to 17% of the oil” which I believe is a production amount … now I am wondering what that means, really just that part… is that percentage equivelate to the daily barrel amount?