How Royalties Work For You

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Let's assume a nice round figure of $100/barrel – actually quite a bit less than oil is selling for right now.

Let's also assume a VERY conservative production of 10 barrels/day. (Often valuable gas is produced along with – or instead of - the oil, but we'll ignore the gas to keep it simple.)

10 barrels/day x $100 = $1000/day gross. Overriding royalty essentially means "off the top", but a few minor taxes do get deducted, so we'll assume a net of $950. to calculate your royalty.

$950 x 5% overriding royalty = $47.50 royalty per day.
$47.50 x 7 days/week = $332.50/week; x 52 = $17,290/year

For higher production, simply multiply the above figures by multiples of 10. For instance, for 30 barrels/day, increase all figures by 3, giving a yearly income of $51,870. 80 b/d = $138,320/year, etc.

The well probably will not produce 365 days/ year; it will be offline a day or so now and then for servicing. But, these figures give valid yearly guidelines for royalty income potential in these days of soaring crude prices.

Approximately half of our client leases which have been drilled have produced royalties. We expect this trend to continue or improve in the future due to rapidly developing technologies such as 3-D seismic profiling and the unprecedented high price of crude and natural gas.