How to read a royalty check
How to read a royalty check
If you are new to receiving a royalty check for oil and gas properties, you may have questions about what the information is telling you. This post will provide the types of data you might see and highlight those (in blue) of significance. The items we highlight, you will want to keep track of on a spreadsheet or other form to ensure you are aware of your revenue stream for informational and tax purposes.
Key components of a check detail
Property Name: The property name assigned by the property operator.
Property Number: Internal number for the property. If you have any questions for the operator, this is a good identifier.
Interest Type: Your type of ownership in the property and usually has the following types:
1 Working Interest
2 Royalty Interest
3 Overriding Royalty Interest
Owner Interest: Your interest percentage in the property with respect to the operators remittance obligation. This is often called Net Mineral Interest.
Production Date: Month and year when sales occurred. Oil is usually paid on the 20th of the month following production and gas is usually paid by the 10th of the second month following production.
Product Type: Type of product for which you are being paid. Products reported
are usually identified on the check stub and may include:
Quantity: Barrels (Bbls) of crude oil, condensate, or thousand cubic feet (Mcf) of natural gas associated with the total sales from the property for which the operator makes a royalty payment to you.
Average Price: Average price (before taxes and deducts) per Bbl or Mcf.
Gross Value: Value of crude oil, condensate, plant products or natural gas associated
with the quantity, as described above. This is the price multiplied by the Quantity
Gross Tax: Amount of severance and other production related taxes associated with the
property. Most states have severance taxes and the operator is required to pay them on your behalf.
Other Deducts: Amount of any deductions other than severance and other production related taxes. These could be transportation and marketing charges, cost of compressing natural gas, cost of removing water from natural gas. However, please note that most of these deductions are charged to the working interest owners and not mineral owners. With that said, all mineral owners need to expect some processing and transportation fees for Natural Gas wells.
Gross Net Value: Value from the property less all deductions and taxes.
Owner Gross Value: Your share of gross value from the property prior to any deductions. This is your share multiplied by the quantity sold.
Owner Tax: Your share of severance and other production related taxes.
Owner Other Deducts: Your share of other deductions.
Owner Net Value: Your share of the value from the property less all deductions and taxes. This is essentially the amount you can expect to receive or deposit for a property. Please see the following link as an example of a royalty check stub: Royalty Check Example
If you still have questions about your royalty check, or are concerned about how the current crude oil market may impact your revenue, please let us know by filling out the form below.
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