How to Calculate an Oil and Gas Royalty Interest for a Lease Well

Calculating an oil and gas royalty interest can become quite complicated for some wells, for a number of reasons. Understanding the fundamental formula and reasoning behind the royalty interest calculation can help an oil and gas royalty owner be more skilled at determining if they are being paid royalties correctly. This article is based on calculations for a Texas well, therefore, an owner in another state might need to adjust the calculations based on that state’s property rights and oil and gas laws.


  1. 1
    Learn how much of the mineral rights you own in the tract of land for which you want to calculate your royalty decimal.
    • For example, if you know you own all of the mineral rights in the tract of land, then your share of the mineral rights is 100%.
    • If you inherited the mineral rights from a parent or other relative, and the inheritance was split between you and two siblings, then the three of you each own 1/3 of 100%.
    • If the parent or other relative only owned 50% of the mineral rights, then each of the three of you own 1/3 of 50%, or 1/6 of 100%. You get the idea.
    • If you do not know how much of the mineral rights you own, you might be able to “back into” how much you own.
  2. 2
    Look at the oil and gas lease covering your mineral rights interest to find the royalty rate set out in it. The royalty rate should be in a clause below, but close to, the legal description typed into the lease.
    • Not all oil and gas leases reserve a 1/8 royalty. Many leases reserve more than 1/8.
    • If you do not have a copy of the lease, but you know who signed it many years ago, you might be able to get a copy of it online at or The first website contains many more records, but is more expensive than the second. Both of those websites contain a huge database containing copies of deed documents filed in many counties going back many years, and charge a small fee (or a subscription) to allow downloading them as a pdf, using a credit card.
    • If the lease contains an Addendum (a page stapled to the back of the printed form, containing additional lease clauses that become part of the lease), you need to be sure to look in the Addendum to see if a higher royalty rate is stated there. Many leases increase the “1/8” printed in the body of the lease by adding a new clause in the Addendum that says something like “wherever 1/8 appears in this lease, 1/6 (or 3/16, or 1/5, etc.) shall be substituted.”
    • If the lease was renewed, the Lessor (or heirs of the Lessor) who signed the renewal might have re-negotiated a higher royalty rate for the renewal than in the original lease. Just be aware.
  3. 3
    Know what kind of tract you're dealing with. Once you know your share of mineral rights in the tract, and you know the royalty rate in the lease covering your interest, you next need to know whether the well is producing from a single tract, or if it is “pooled” by combining several tracts that sit right up against one another. To be a “lease well”, the well must be producing from a single, large tract, and to calculate your interest in the tract well, you must own all or part of the mineral rights in that entire big tract. If you know your land is a small tract, you probably own a royalty interest in a pooled unit, so please look at How to Calculate an Oil and Gas Royalty Interest for a Pooled Unit Well.
  4. 4
    Use this formula to calculate your decimal share of royalties from the producing well: (Mineral Interest Share) times (Royalty Rate) = (Royalty Share Decimal).
    • Example 1: (1/3 x 100% mineral interest) times (1/8 Royalty Rate) = 1/3 x 1/8 = 1/24 = 0.04166667 RI. You should be seeing “0.04166667” on the check detail with each of your royalty checks, or on the division order.
    • Example 2: (1/3 x 50%) times (3/16 Royalty Rate) = (1/3 x 1/2) x 3/16 = 1/6 x 3/16 = 3/96 = 0.03125000 RI.
    • Example 3: (47/1137) times (22% Royalty Rate stated in lease) = (0.04133685) x 0.22 = 0.00909411 RI.


  • You can translate your royalty decimal into dollars. Take the decimal on your check detail or division order and make it 8 digits after the decimal, if it is not already (Examples: 0.009094 becomes 0.00909400, and 0.009094111 is rounded back to 0.00909411). Start at the end of the 8 digits and count back two numbers. Put the decimal point there instead of where it is. (Examples: 0.00909411 becomes 0009094.11, 0.04166667 becomes 0041666.67). Take off all of the zeroes in front. Count back three digits from the new decimal place and put a coma. Put a dollar sign in front. (Examples: 0009094.11 becomes $9,094.11, and 0041666.67 becomes $41,666.67). This is how much money your royalty interest will get for every ONE MILLION DOLLARS PRODUCED FROM THE WELL. The majority of wells produce less than $10 Million over their lifetime, which can span 20 years or more.

Sources and Citations

  • Breazeale, M. (2010, April). Working interest/net revenue interest calculations. Paper presented at the meeting of the Association of Lease and Title Analysts, Houston, Texas.

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