01
Gross acres vs. net acres
Gross acres are the size of the tract. Net mineral acres are your share of it, stated in acres.
Every interest calculation starts by keeping those two apart. The gross acreage is the size of the tract, what a surveyor would measure. Your net mineral acres are that number multiplied by the fraction of the minerals you own:
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The diagram is a simplification. An undivided 1/4 interest is a 1/4 share in every acre of the tract, not a separate quarter of the land.
Your fractional mineral ownership expressed in acres: fraction owned × gross acres in the tract. Lease bonus is usually quoted per NMA.
02
Calculating net mineral acres
In a chain of title, the fraction builds up over many conveyances. The method is to walk the chain and multiply.
Step 3 turns on the deed's wording. Compare:
- "1/4 of the minerals": a fraction of the whole mineral estate. Cora would get 1/4, leaving Ben 1/4.
- "1/4 of my interest": a fraction of what the grantor owns. Cora gets 1/4 × 1/2 = 1/8, and Ben keeps 3/8.
Many deed disputes turn on whether a fraction applies to the whole mineral estate or only to the grantor's interest.
To practice walking a chain and multiplying the fractions, try the chain of title lesson.
03
Working interest & net revenue interest
NMA measures what you own. The net revenue interest (NRI) measures what you are paid: your decimal share of each production dollar. The two differ because the lease splits revenue between two sides:
- The working interest (WI) is the lessee's side: the right to develop, and the duty to pay all the costs of drilling and producing.
- The royalty side: the lessor, and anyone else holding a royalty, shares in revenue without paying the costs of drilling or producing the well. Whether a royalty shares costs after production (gathering, processing, transport) depends on the lease and state law.
For a royalty owner, the equation has three numbers:
The working interest has its own version. The lessee receives what is left after the royalty burdens come off the top. With a 1/4 royalty and no other burdens, a 100% working interest has an NRI of 1 − 0.25 = 0.75.
04
Overriding royalties & NPRIs
Two more interests are paid out of production. NPRIs came up in Topic 01; overrides are new here.
- An overriding royalty interest (ORRI) is carved out of the lease, typically when a landman, geologist, or earlier lessee assigns the lease and keeps "an override." It is a share of production that pays none of the drilling or operating costs, and it usually ends when that lease ends. It comes out of the working interest's share.
- A non-participating royalty interest (NPRI) is carved out of the mineral estate itself: stick five from Topic 01, created by deed. It is not tied to any one lease, and it is paid out of the mineral owner's royalty, not out of the working interest.
The arithmetic is subtraction: WI NRI = WI share × (1 − lease royalty − overrides). Each burden reduces the working interest's NRI. With a 1/4 lease royalty and two overrides from earlier assignments, one of 0.04 and one of 0.03, the operator's NRI drops from 0.75 to 0.68. An NPRI on the same lease doesn't change that 0.68; it splits the lessor's royalty:
A 100% working interest under a lease with a 1/4 royalty. Two overrides: 0.04 and 0.03. The mineral owner's tract is burdened by an NPRI of 1/2 of the royalty. Who gets what?
An NPRI is usually borne by the owner of the mineral interest it was carved from, out of that owner's royalty. An examiner has to determine whose share an NPRI burdens, and whether the deed created a fixed share of production or a share of whatever royalty the lease pays. The deed's wording and state law both matter, so settle that before you calculate.
The Fraction of what? lesson has practice telling a fixed share of production from a share of the royalty.
05
Pooling & unit math
Topic 03 introduced pooling: several tracts combined into one drilling unit that shares one well. Each pooled owner's share of the well is set by acreage contribution.
Try the pooling lesson to see it on a map.
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Pooling uses the same equation as Fig. 3: your NMA in the unit, divided by the unit's total acres, times your royalty. Once your tract is pooled into the unit, the well can be on your tract or a neighbor's and the math is the same. If your tract isn't pooled or unitized, you don't share in a well on the neighbor's tract. Whether it is pooled depends on the lease's pooling clause, any pooling agreement, and state pooling rules.
Units in practice are more complicated: tracts can contribute partially, and some states' regulatory units allocate production on factors other than acreage. The acreage version here is the standard model.
06
Worked examples
Three examples. Work each one before reading the steps. For more practice, try the royalty decimal interactive.
Sam owns 40 NMA in a tract fully inside a 320-acre unit, leased at 1/8 royalty. What's Sam's decimal?
Grandma owned 1/2 the minerals under 240 acres. Her interest passed equally to 3 grandkids; you're one of them. You lease at 3/16, and the whole tract goes into a 640-acre unit. Your decimal?
Dee owns 1/4 of the minerals under a 320-acre tract, but only 160 acres of that tract fall inside the 640-acre unit. Lease royalty: 1/4. Dee's decimal in this unit's well?
The partial-tract example lands on the same decimal as the simple one by a different path. Show each step. Two owners with the same decimal can have very different titles.
07
Division orders & the decimal interest
All of this arithmetic ends up in one document. Before a well's revenue is paid out, the payor sends each owner a division order stating the owner's decimal, to be confirmed and signed:
Before signing a division order:
- Check the decimal yourself. Payors work from the same records you do, and they make mistakes. If your math says 0.01171875 and the division order says 0.01071875, find out which is wrong before you sign.
- A division order is an accounting document that confirms ownership for payment. It is not a conveyance. Signing one generally doesn't change your underlying ownership, but the effect of signing a wrong one varies by state, which is another reason to check the number.
08
Review questions
Tap a question to see the answer.