A Non-Participating Royalty Interest (NPRI) is a right that has been carved out of a mineral estate in which the owner of the NPRI is entitled to receive a pro rata share of the royalties attributable to a specific tract of land. That means the interest holder does not receive any part of bonuses, rental payments, surface damages, or shut-in payments. They only get the designated percentage of royalties. Further, non-participating means that the interest owner does not have the right to execute an oil and gas lease.

An example: Joe and Diane Royalty Owners leased their undivided one-half mineral interest in 40 acres to XYZ oil company with a one-fifth (1/5) royalty. XYZ oil company pooled the 40 acres into a 640-acre unit. To calculate the NRI, multiply the tract size (40 acres) by the percentage of ownership (50%) by the royalty rate (1/5) and then divide by the unit size (640 acres). So in our example the calculation is: (40.5.2)/640. This gives an NRI of .00625.

Check the math. When signing a division order make sure you check the oil and gas companies’ math – you don’t want to sign something that mistakenly gives you less money. You will want to make sure that it reflects what you have negotiated on the lease. Your division order will have your NRI, or net revenue interest, stated. This is your percentage share of the proceeds from the sale of the oil and gas from the well or unit described in the division order.

Often with oil and gas mineral rights, a well will be owned by multiple persons or entities. A division order specifically details the individual mineral owner’s ownership interest in an oil and/or gas well. The decimal/royalty interest signifies how much of the revenue a specific mineral owner will receive as a result of the proceeds that come from the sale of the product the oil and/or gas well produces. Usually royalties will not be distributed to an owner until that owner has signed a division order.

An experienced oil and gas attorney is always your best bet when it comes to signing a lease before receiving a division order to sign. To make sure that your interests are protected you should consider consulting an attorney. Your attorney will be able to tell if everything is in order.

The elements of mineral rights laws vary by state. However, there are some general points to consider when negotiating a mineral rights contract. First is the right to use as much of the surface as is necessary to access the minerals. Some types of drilling can be done completely underground with minimal surface interruption. Second is the right to receive bonus considerations. The owner of a non-participating royalty interest does not usually receive the rights to any bonus payments. Next is the right to receive delay rental payments, which are fees paid to delay production or commencement of drilling, without terminating the lease. Delay rentals are rarely used in modern times.

We base our initial offers off of the size of the unit your interest falls in and the net revenue interest (sometimes called decimal interest) you are being paid on said unit. Our offer also assumes your interest covers all depths and is not a “term” interest (an interest that expires at a given time). We gather this information from publicly available data. It is not our intention to run a “bait-and-switch” scheme of sending out larger offers than we are actually willing to pay like so many other companies. We would only ever reduce the price we are willing to pay from what we initially offered for one of two reasons: if you have sold all or part of your interest in the past year or if the publicly available data we base our assumptions off of prove to be incorrect after further due diligence.

The offer that San Saba Royalty is actually making is the offer shown in the draft and offer letter. In the state of Texas, it is common practice to state on the conveyance “Ten Dollars ($10) and other good and valuable consideration” solely for privacy reasons. Because the mineral and royalty conveyance will be filed on record in the county courthouse, many sellers and buyers would prefer to keep the actual transaction price outside of the public domain.

Absolutely not. We are interested in any and all opportunities to acquire minerals and royalties. Contact us and we can let you know what information we need to make an offer on your interests.