How to Calculate Royalty Payments
Those who own land where minerals are mined are entitled to royalty payments if someone else is mining that land. Figuring out a rough estimate of how much money you're owed in royalties can be a little complicated. But if you have the proper information to plug into a simple formula, you should be able to guess about what you're owed. The formula doesn't take taxes into account though, so you should keep that in mind.
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Instructions
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Gather all your facts and figures. You need: the royalty percentage you're paid; the amount of oil the well produces in barrels per month; and the price of oil per barrel at the wellhead. If you don't have these three numbers on hand, then all you need to do is contact the county appraiser to try and receive the necessary facts.
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Multiply the price per barrel on the wellhead by the number of barrels that were produced from the well in a month. The price may vary over 30 days; if it does, use the average price over those 30 days.
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Take the number you get from Step 2 and then multiply it times your royalty percentage. This is the number, roughly, that you should expect to receive in royalties at the end of the month (since royalties are calculated on a monthly basis).
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Tips & Warnings
If you want to be more accurate, you can calculate your royalties on a daily basis. Simply use the daily amount produced times the daily price of the mineral, with the result multiplied by your royalty percentage.
This is only a rough estimate that doesn't take taxes into account. This royalty calculation should only be used to ballpark your royalty payment.
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- Photo Credit band of land image by Chris Holmes from Fotolia.com
